1933 Act Registration No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14AE
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective [ ] Post-Effective
Amendment No. Amendment No.
KEYSTONE PRECIOUS METALS HOLDINGS, INC.
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (617) 210-3200
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------
(Address of Principal Executive Offices)
Rosemary D. Van Antwerp, Esq.
Keystone Investment Management Company
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------------
(Name and Address of Agent for Service)
Copies of All Correspondence to:
Robert N. Hickey, Esq.
Sullivan & Worcester LLP
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
Approximate date of proposed public offering: As soon as possible after
the effective date of this Registration Statement.
The Registrant has registered an indefinite amount of securities under
the Securities Act of 1933 pursuant to Section 24(f) under the Investment
Company Act of 1940 (File No. 33- 11050); accordingly, no fee is payable
herewith. Pursuant to Rule 429, this Registration Statement relates to the
aforementioned registration on Form N-1A. A Rule 24f-2 Notice for the
Registrant's fiscal year ended February 28, 1997 was filed with the Commission
on or about April 30, 1997.
It is proposed that this filing will become effective on January 2,
1998 pursuant to Rule 488 of the Securities Act of 1933.
<PAGE>
KEYSTONE PRECIOUS METALS
HOLDINGS, INC.
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
Location in Prospectus/Proxy
Item of Part A of Form N-14 Statement
1. Beginning of Registration Cross Reference Sheet; Cover
Statement and Outside Page
Front Cover Page of
Prospectus
2. Beginning and Outside Table of Contents
Back Cover Page of
Prospectus
3. Fee Table, Synopsis and Comparison of Fees and
Risk Factors Expenses; Summary; Comparison
of Investment Objectives and
Policies; Risks
4. Information About the Summary; Reasons for the
Transaction Reorganization; Comparative
Information on Shareholders'
Rights; Exhibit A (Agreement
and Plan of Reorganization)
5. Information about the Cover Page; Summary; Risks;
Registrant Comparison of Investment
Objectives and Policies;
Comparative Information on
Shareholders' Rights;
Additional Information
6. Information about the Cover Page; Summary; Risks;
Company Being Acquired Comparison of Investment
Objective and Policies;
Comparative Information on
Shareholders' Rights;
Additional Information
<PAGE>
7. Voting Information Cover Page; Summary; Voting
Information Concerning the
Meeting
8. Interest of Certain Financial Statements and
Persons and Experts Experts; Legal Matters
9. Additional Information Inapplicable
Required for Reoffering
by Persons Deemed to be
Underwriters
Item of Part B of Form N-14
10. Cover Page Cover Page
11. Table of Contents Omitted
12. Additional Information Statement of Additional
About the Registrant Information of Keystone
Precious Metals Holdings, Inc.
dated April 30, 1997, as
supplemented
13. Additional Information Statement of Additional
about the Company Being Information of Blanchard
Acquired Precious Metals Fund, Inc.,
dated August 31, 1997
14. Financial Statements Financial Statements dated
October 31, 1997 of Keystone
Precious Metals Holdings,
Inc.; Financial Statements of
Blanchard Precious Metals
Fund, Inc. dated September 30,
1997; Pro Forma Financial
Statements of Evergreen
Precious Metals Fund
<PAGE>
Item of Part C of Form N-14
Incorporated by Reference to
15. Indemnification Part A Caption - "Comparative
Information on Shareholders'
Rights - Liability and
Indemnification of Trustees
and Directors"
16. Exhibits Item 16. Exhibits
17. Undertakings Item 17. Undertakings
<PAGE>
BLANCHARD PRECIOUS METALS FUND, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
January 5, 1998
Dear Shareholder,
I am writing to shareholders of the Blanchard Precious Metals Fund, Inc. (the
"Fund"), to inform you of a Special Shareholders' meeting to be held on February
20, 1998. Before that meeting, I would like your vote on the important issues
affecting your Fund as described in the attached Prospectus/Proxy Statement.
The Prospectus/Proxy Statement includes three proposals. The first proposal
requests that shareholders consider and act upon an Agreement and Plan of
Reorganization whereby all of the assets of the Fund would be acquired by
Evergreen Precious Metals Fund (formerly known as "Keystone Precious Metals
Holdings, Inc.") in exchange for Class A shares of Evergreen Precious Metals
Fund and the assumption by Evergreen Precious Metals Fund of certain liabilities
of the Fund. You will receive shares of Evergreen Precious Metals Fund having an
aggregate net asset value equal to the aggregate net asset value of your Fund
shares. Details about Evergreen Precious Metals Fund's investment objective,
portfolio management team, performance, etc. are contained in the attached
Prospectus/Proxy Statement. The transaction is a non-taxable event for
shareholders.
The second proposal requests shareholder consideration of an Interim Investment
Advisory Agreement between the Fund and Virtus
Capital Management, Inc.
The third and final proposal requests shareholder consideration of an
Interim Sub-Advisory Agreement between Virtus Capital Management, Inc. and
Cavelti Capital Management, Ltd.
Information relating to the Interim Investment Advisory Agreement and the
Interim Sub-Advisory Agreement is contained in the attached Prospectus/Proxy
Statement.
The Board of Directors has unanimously approved the proposals and recommends
that you vote FOR these proposals.
I realize that this Prospectus/Proxy Statement will take time to review, but
your vote is very important. Please take the time to familiarize yourself with
the proposals presented and sign and return your proxy card in the enclosed
postage-paid envelope today.
<PAGE>
If we do not receive your completed proxy card after several weeks, you may be
contacted by our proxy solicitor, Shareholder Communications Corporation, who
will remind you to vote your shares.
Thank you for taking this matter seriously and participating in this important
process.
Sincerely,
[Name]
[Title]
Blanchard Precious Metals Fund, Inc.
<PAGE>
[SUBJECT TO COMPLETION, DECEMBER 3, 1997 PRELIMINARY COPY]
BLANCHARD PRECIOUS METALS FUND, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 20, 1998
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Blanchard Precious Metals Fund, Inc. ("Precious Metals") will be
held at the offices of the Evergreen Funds, 200 Berkeley Street, 26th Floor,
Boston, Massachusetts 02116 on February 20, 1998 at 2:00 p.m. for the following
purposes:
1. To consider and act upon the Agreement and Plan of Reorganization
(the "Plan") dated as of November 26, 1997, providing for the acquisition of all
of the assets of Precious Metals by the Evergreen Precious Metals Fund
("Evergreen Precious Metals") (formerly known as "Keystone Precious Metals
Holdings, Inc."), a series of the Evergreen International Trust, in exchange for
Class A shares of Evergreen Precious Metals and the assumption by Evergreen
Precious Metals of certain identified liabilities of Precious Metals. The Plan
also provides for distribution of such shares of Evergreen Precious Metals to
shareholders of Precious Metals in liquidation and subsequent termination of
Precious Metals. A vote in favor of the Plan is a vote in favor of the
liquidation and dissolution of Precious Metals.
2. To consider and act upon the Interim Management Contract between
Precious Metals and Virtus Capital Management, Inc.
3. To consider and act upon the Interim Sub-Advisory Agreement between
Virtus Capital Management, Inc. and Cavelti Capital Management, Ltd.
4. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.
The Board of Directors of Precious Metals has fixed the close of
business on December 26, 1997 as the record date for the determination of
shareholders of Precious Metals entitled to notice of and to vote at the Meeting
or any adjournment thereof.
<PAGE>
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND IN PERSON ARE URGED WITHOUT DELAY TO SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE
ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Directors
John W. McGonigle
Secretary
January 5, 1998
<PAGE>
INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and may help to avoid the time and expense involved in
validating your vote if you fail to sign your proxy card(s) properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it
appears in the Registration on the proxy card(s).
2. JOINT ACCOUNTS: Either party may sign, but the name of
the party signing should conform exactly to a name shown in the
Registration on the proxy card(s).
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy
card(s) should be indicated unless it is reflected in the form of Registration.
For example:
REGISTRATION VALID SIGNATURE
CORPORATE
ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith, Jr. John B. Smith, Jr.,
Executor
<PAGE>
PROSPECTUS/PROXY STATEMENT DATED JANUARY 5, 1998
Acquisition of Assets of
BLANCHARD PRECIOUS METALS FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By and in Exchange for Shares of
EVERGREEN PRECIOUS METALS FUND
a series of
Evergreen International Trust
200 Berkeley Street
Boston, Massachusetts 02116
This Prospectus/Proxy Statement is being furnished to shareholders of
Blanchard Precious Metals Fund, Inc. ("Precious Metals") in connection with a
proposed Agreement and Plan of Reorganization (the "Plan") to be submitted to
shareholders of Precious Metals for consideration at a Special Meeting of
Shareholders to be held on February 20, 1998 at 2:00 p.m. at the offices of the
Evergreen Funds, 200 Berkeley Street, Boston, Massachusetts 02116, and any
adjournments thereof (the "Meeting"). The Plan provides for all of the assets of
Precious Metals to be acquired by Evergreen Precious Metals Fund ("Evergreen
Precious Metals") (formerly known as "Keystone Precious Metals Holdings, Inc.")
in exchange for Class A shares of Evergreen Precious Metals and the assumption
by Evergreen Precious Metals of certain identified liabilities of Precious
Metals (hereinafter referred to as the "Reorganization"). Evergreen Precious
Metals and Precious Metals are sometimes hereinafter referred to individually as
the "Fund" and collectively as the "Funds." Following the Reorganization, Class
A shares of Evergreen Precious Metals will be distributed to shareholders of
Precious Metals in liquidation of Precious Metals and such Fund will be
terminated. No initial sales charges will be imposed in connection with the
shares of Evergreen Precious Metals received by holders of shares of Precious
Metals. As a result of the proposed Reorganization, shareholders of Precious
Metals will receive that number of full and fractional Class A shares of
Evergreen Precious Metals having an aggregate net asset value equal to the
aggregate net asset value of such shareholder's shares of Precious Metals. The
Reorganization is being structured as a tax-free reorganization for federal
income tax purposes.
Evergreen Precious Metals is a separate series of Evergreen
International Trust, an open-end management investment company registered under
the Investment Company Act of 1940, as amended
<PAGE>
(the "1940 Act"). The investment objectives of Evergreen Precious Metals are to
seek long-term capital appreciation while protecting the purchasing power of
shareholders' capital and, as a secondary objective, to obtain current income.
Evergreen Precious Metals invests primarily in common stocks of established
companies directly or indirectly engaged in mining, processing or dealing in
gold or other precious metals and minerals.
The primary investment objective of Precious Metals is to provide
long-term capital appreciation and preservation of purchasing power through
investments in physical precious metals, such as gold, silver, platinum, and
palladium, and in securities of companies involved with precious metals.
Shareholders of Precious Metals are also being asked to approve the
Interim Management Contract with Virtus Capital Management, Inc., a subsidiary
of First Union Corporation ("Virtus"), (the "Interim Advisory Agreement") with
the same terms and fees as the previous advisory agreement between Precious
Metals and Virtus and the Interim Sub-Advisory Agreement between Virtus and
Cavelti Capital Management Ltd. ("Cavelti Capital") with the same terms and fees
as the previous sub- advisory agreement between Virtus and Cavelti Capital. The
Interim Advisory Agreement and Interim Sub-Advisory Agreement will be in effect
for the period of time between November 28, 1997, the date on which the merger
of Signet Banking Corporation with and into a wholly-owned subsidiary of First
Union Corporation was consummated, and the date of the Reorganization (scheduled
for on or about February 27, 1998).
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about Evergreen Precious Metals
that shareholders of Precious Metals should know before voting on the
Reorganization. Certain relevant documents listed below, which have been filed
with the Securities and Exchange Commission ("SEC"), are incorporated in whole
or in part by reference. A Statement of Additional Information dated January 5,
1998, relating to this Prospectus/Proxy Statement and the Reorganization which
includes the financial statements of Evergreen Precious Metals dated October 31,
1997 and Precious Metals dated September 30, 1997, has been filed with the SEC
and is incorporated by reference in its entirety into this Prospectus/Proxy
Statement. A copy of such Statement of Additional Information is available upon
request and without charge by writing to Evergreen Precious Metals at 200
Berkeley Street, Boston, Massachusetts 02116, or by calling toll-free
1-800-343-2898.
The Prospectus of Evergreen Precious Metals dated April 30, 1997, as
supplemented, and its Annual Report for the fiscal year
<PAGE>
ended October 31, 1997 are incorporated herein by reference in their entirety.
Shareholders of Precious Metals will receive, with this Prospectus/Proxy
Statement, copies of the Prospectus of Evergreen Precious Metals. Additional
information about Evergreen Precious Metals is contained in its Statement of
Additional Information of the same date which has been filed with the SEC and
which is available upon request and without charge by writing to or calling
Evergreen Precious Metals at the address or telephone number listed in the
preceding paragraph.
The Prospectus of Precious Metals dated August 31, 1997, insofar as it
relates to Precious Metals only, and not to any other funds described therein,
is incorporated herein in its entirety by reference. Copies of the Prospectus
and related Statement of Additional Information dated the same date, are
available upon request without charge by writing to Precious Metals at the
address listed on the cover page of this Prospectus/Proxy Statement or by
calling toll-free 1-800-829- 3863.
Included as Exhibits A, B and C to this Prospectus/Proxy Statement are
a copy of the Plan, the Interim Advisory Agreement and the Interim Sub-Advisory
Agreement, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The shares offered by this Prospectus/Proxy Statement are not deposits
or obligations of any bank and are not insured or otherwise protected by the
U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other government agency and involve investment risk, including
possible loss of capital.
<PAGE>
TABLE OF CONTENTS
Page
COMPARISON OF FEES AND EXPENSES..............................................6
SUMMARY ....................................................................8
Proposed Plan of Reorganization.....................................8
Tax Consequences...................................................10
Investment Objectives and Policies of the Funds....................11
Comparative Performance Information for each Fund..................11
Management of the Funds............................................12
Investment Advisers and Sub-Adviser................................12
Administrator......................................................14
Portfolio Manager..................................................14
Distribution of Shares.............................................14
Purchase and Redemption Procedures.................................15
Exchange Privileges................................................16
Dividend Policy....................................................16
Risks ..........................................................17
REASONS FOR THE REORGANIZATION..............................................19
Agreement and Plan of Reorganization...............................21
Federal Income Tax Consequences....................................24
Pro-forma Capitalization...........................................25
Shareholder Information............................................26
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES............................27
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS.............................30
Forms of Organization..............................................30
Capitalization.....................................................30
Shareholder Liability..............................................31
Shareholder Meetings and Voting Rights.............................31
Liquidation or Dissolution.........................................32
Liability and Indemnification of Trustees and
Directors.....................................................32
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT........................34
Introduction.......................................................34
Comparison of the Interim Advisory Agreement and the
Previous Advisory Agreement...............................35
Information about Precious Metals' Investment
Adviser.......................................................36
INFORMATION REGARDING THE INTERIM SUB-ADVISORY AGREEMENT....................37
Introduction.......................................................37
Comparison of the Interim Sub-Advisory Agreement
and the Previous Sub-Advisory Agreement.......................38
<PAGE>
ADDITIONAL INFORMATION......................................................39
VOTING INFORMATION CONCERNING THE MEETING...................................40
FINANCIAL STATEMENTS AND EXPERTS............................................42
LEGAL MATTERS...............................................................43
OTHER BUSINESS..............................................................43
APPENDIX A..................................................................44
APPENDIX B..................................................................45
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
<PAGE>
COMPARISON OF FEES AND EXPENSES
It is anticipated that on or about January 9, 1998 Evergreen Precious
Metals will become a multiple class fund. As of that date the Fund will offer
Class A, Class B and Class C shares. It is further anticipated that at that time
current outstanding shares of Evergreen Precious Metals will become Class B
shares of the Fund. On or before January 16, 1998, it is anticipated that any
Class B shares of Evergreen Precious Metals purchased prior to January 1, 1995
will convert to Class A shares of the Fund. The amounts for Class A shares of
Evergreen Precious Metals set forth in the following tables and in the examples
are based on the expenses of Evergreen Precious Metals for the fiscal year ended
October 31, 1997. The amounts for shares of Precious Metals set forth in the
following tables and in the examples are based on the expenses for Precious
Metals for the fiscal year ended September 30, 1997. The pro forma amounts for
Class A shares of Evergreen Precious Metals are based on what the combined
expenses would have been for Evergreen Precious Metals for the fiscal year
ending October 31, 1997. The pro forma numbers reflect the events described
above. All amounts are adjusted for voluntary expense waivers.
The following tables show for Evergreen Precious Metals, Precious
Metals and Evergreen Precious Metals pro forma, assuming consummation of the
Reorganization, the shareholder transaction expenses and annual fund operating
expenses associated with an investment in the Class A shares of Evergreen
Precious Metals and shares of Precious Metals, as applicable.
<TABLE>
<CAPTION>
Comparison of Class A Shares
of Evergreen Precious Metals With
Shares of Precious Metals
Evergreen
Evergreen Precious
Precious Precious Metals Pro
Metals Metals Forma
---------- ------ ----------
Shareholder
Transaction Shares Shares Class A
Expenses ------ ------ -------
<S> <C> <C> <C>
Maximum Sales Load None None 4.75%
Imposed on Purchases
(as a percentage of
offering price)
<PAGE>
Maximum Sales Load 4.00% None None
Imposed on Reinvested
Dividends (as a
percentage of offering
price)
Contingent Deferred None None None
Sales Charge (1)(as a
percentage of original
purchase price or
redemption proceeds,
whichever is lower)
Exchange Fee None None None
Annual Fund Operating
Expenses (as a
percentage of average
daily net assets)
Management Fee 0. % 1.00% 0.66%
12b-1 Fees (1) 0.25% 0.75% 0.25%
Other Expenses % 0.46% 0.63%
--------- -------- ---------
Annual Fund Operating % 2.21% 1.54%
Expenses --------- --------- ---------
--------- --------- ---------
</TABLE>
- ---------------
(1) Class A shares of Evergreen Precious Metals can pay up to 0.75% of
average daily net assets as a 12b-1 fee. For the foreseeable future,
the Class A 12b-1 fees will be limited to 0.25% of average daily net
assets.
Examples. The following tables show for Evergreen Precious Metals and
Precious Metals, and for Evergreen Precious Metals pro forma, assuming
consummation of the Reorganization, examples of the cumulative effect of
shareholder transaction expenses and annual fund operating expenses indicated
above on a $1,000 investment in each class of shares for the periods specified,
assuming (i) a 5% annual return and (ii) redemption at the end of such period.
In the case of Evergreen Precious Metals - pro forma, the example does not
reflect the imposition of the 4.75% sales load on purchases because Precious
Metals shareholders who receive shares of Evergreen Precious Metals in the
Reorganization or who purchase additional Class A shares of Evergreen Precious
Metals subsequent to the Reorganization will not incur any sales load.
<PAGE>
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C>
Evergreen Precious
Metals $__ $__ $___ $___
Precious Metals $22 $69 $118 $254
Evergreen Precious
Metals - Pro Forma $16 $49 $84 $183
Class A
</TABLE>
The purpose of the foregoing examples is to assist Precious Metals
shareholders in understanding the various costs and expenses that an investor in
Evergreen Precious Metals would bear directly and indirectly as a result of the
Reorganization as compared with the various direct and indirect expenses
currently borne by a shareholder in Precious Metals. These examples should not
be considered a representation of past or future expenses or annual return.
Actual expenses may be greater or less than those shown.
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy Statement,
and, to the extent not inconsistent with such additional information, the
Prospectus of Evergreen Precious Metals dated April 30, 1997, as supplemented,
and the Prospectus of Precious Metals dated August 31, 1997 (which are
incorporated herein by reference), the Plan, the Interim Advisory Agreement and
the Interim Sub-Advisory Agreement, forms of which are attached to this
Prospectus/Proxy Statement as Exhibits A, B and C, respectively.
Proposed Plan of Reorganization
The Plan provides for the transfer of all of the assets of Precious
Metals in exchange for Class A shares of Evergreen Precious Metals and the
assumption by Evergreen Precious Metals of certain identified liabilities of
Precious Metals. The identified liabilities consist only of those liabilities
reflected on the fund's statement of assets and liabilities determined
immediately preceding the Reorganization. The Plan also calls for the
distribution of shares of Evergreen Precious Metals to Precious Metals
shareholders in liquidation of Precious Metals as part of the Reorganization. As
a result of the
<PAGE>
Reorganization, the shareholders of Precious Metals will become the owners of
that number of full and fractional Class A shares of Evergreen Precious Metals
having an aggregate net asset value equal to the aggregate net asset value of
the shareholder's shares of Precious Metals, as of the close of business
immediately prior to the date that Precious Metals' assets are exchanged for
shares of Evergreen Precious Metals. See "Reasons for the Reorganization -
Agreement and Plan of Reorganization."
The Board of Directors of Precious Metals, including the Directors who
are not "interested persons," as such term is defined in the 1940 Act (the
"Independent Directors"), have concluded that the Reorganization would be in the
best interests of shareholders of Precious Metals, and that the interests of the
shareholders of Precious Metals will not be diluted as a result of the
transactions contemplated by the Reorganization. Accordingly, the Directors have
submitted the Plan for the approval of Precious Metals' shareholders.
THE BOARD OF DIRECTORS OF PRECIOUS METALS
RECOMMENDS APPROVAL BY SHAREHOLDERS OF
OF THE PLAN EFFECTING THE REORGANIZATION.
The Trustees of Evergreen International Trust, on behalf of Evergreen
Precious Metals, have also approved the Plan, and accordingly Evergreen Precious
Metals' participation in the Reorganization.
Approval of the Reorganization on the part of Precious Metals will
require the affirmative vote of a majority of Precious Metals' shares voted and
entitled to vote, with all classes voting together as a single class at a
Meeting at which a quorum of the Fund's shares is present. A majority of the
outstanding shares entitled to vote, represented in person or by proxy, is
required to constitute a quorum at the Meeting. See "Voting Information
Concerning the Meeting."
The merger (the "Merger") of Signet Banking Corporation ("Signet") with
and into a wholly-owned subsidiary of First Union Corporation ("First Union")
has been consummated and, as a result, by law the Merger terminated the
investment advisory agreement between Virtus and Precious Metals and the
sub-advisory agreement between Virtus and Cavelti Capital. Prior to consummation
of the Merger, Precious Metals received an order from the SEC which permitted
the implementation, without formal shareholder approval, of a new investment
advisory agreement between the Fund and Virtus and a new sub-advisory agreement
between Virtus and Cavelti Capital for a period of not more than 120 days
beginning on the date of the closing of the Merger and continuing through the
date the Interim Advisory Agreement and
<PAGE>
Interim Sub-Advisory Agreement are approved by the Fund's shareholders (but in
no event later than April 30, 1998). The Interim Advisory Agreement and the
Interim Sub-Advisory Agreement have the same terms and fees as the previous
investment advisory agreement between Precious Metals and Virtus and the
previous sub-advisory agreement between Virtus and Cavelti Capital,
respectively. The Reorganization is scheduled to take place on or about February
27, 1998.
Approval of the Interim Advisory Agreement and Interim Sub- Advisory
Agreement requires the affirmative vote of (i) 67% or more of the shares of
Precious Metals present in person or by proxy at the Meeting, if holders of more
than 50% of the shares of Precious Metals outstanding on the record date are
present, in person or by proxy, or (ii) more than 50% of the outstanding shares
of Precious Metals, whichever is less. See "Voting Information Concerning the
Meeting."
If the shareholders of Precious Metals do not vote to approve the
Reorganization, the Directors will consider other possible courses of action in
the best interests of shareholders.
Tax Consequences
Prior to or at the completion of the Reorganization, Precious Metals
will have received an opinion of counsel that the Reorganization has been
structured so that no gain or loss will be recognized by the Fund or its
shareholders for federal income tax purposes as a result of the receipt of
shares of Evergreen Precious Metals in the Reorganization. The holding period
and aggregate tax basis of shares of Evergreen Precious Metals that are received
by Precious Metals' shareholders will be the same as the holding period and
aggregate tax basis of shares of the Fund previously held by such shareholders,
provided that shares of the Fund are held as capital assets. In addition, the
holding period and tax basis of the assets of Precious Metals in the hands of
Evergreen Precious Metals as a result of the Reorganization will be the same as
in the hands of the Fund immediately prior to the Reorganization, and no gain or
loss will be recognized by Evergreen Precious Metals upon the receipt of the
assets of the Fund in exchange for shares of Evergreen Precious Metals and the
assumption by Evergreen Precious Metals of certain identified liabilities.
Investment Objectives and Policies of the Funds
The investment objectives and policies of Evergreen Precious Metals and
Precious Metals are similar in that both seek capital appreciation primarily
through investments in securities of
<PAGE>
companies related to precious metals. There are, however, differences between
the Funds' objectives and policies.
The investment objectives of Evergreen Precious Metals are to seek
long-term capital appreciation while protecting the purchasing power of
shareholders' capital and, secondly, to obtain current income. Evergreen
Precious Metals invests primarily in common stocks of established companies
directly or indirectly engaged in mining processing or dealing in gold or other
precious metals and minerals.
The investment objective of Precious Metals is to provide long-term
capital appreciation and preservation of purchasing power through investments in
physical precious metals, such as gold, silver, platinum, and palladium, and in
securities of companies involved with precious metals. The Fund will ordinarily
tend to emphasize precious metals securities over physical precious metals
investments.
See "Comparison of Investment Objectives and Policies" below.
Comparative Performance Information for each Fund
Discussions of the manner of calculation of total return are contained
in the respective Prospectus and Statement of Additional Information of the
Funds. The total return of Evergreen Precious Metals and Precious Metals for the
one, five, and if applicable, ten year periods ended September 30, 1997, and for
both funds for the periods from inception through September 30, 1997 are set
forth in the table below. The calculations of total return assume the
reinvestment of all dividends and capital gains distributions on the
reinvestment date and the deduction of all recurring expenses (including sales
charges) that were charged to shareholders' accounts.
<TABLE>
<CAPTION>
Average Annual Total Return
1 Year 5 Years 10 Years From
Ended Ended Ended Inception
September September September To
30, 30, 30, September Inception
1997 1997 1997 30, 1997 Date
------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Evergreen (19.88%) 6.65% (1.82%) 9.58% 1/30/78
Precious
Metals
<PAGE>
Precious (15.24%) 9.96% N/A 1.27% 6/22/88
Metals
- ---------
</TABLE>
Important information about Evergreen Precious Metals is also contained
in management's discussion of Evergreen Precious Metals' performance, attached
hereto as Exhibit D. This information also appears in the most recent Annual
Report of Evergreen Precious Metals.
Management of the Funds
The overall management of Evergreen Precious Metals and of Precious
Metals is the responsibility of, and is supervised by, the Board of Trustees of
Evergreen International Trust and the Board of Directors of Precious Metals,
respectively.
Investment Advisers and Sub-Adviser
Keystone Investment Management Company ("Keystone") serves as
investment adviser to Evergreen Precious Metals. Keystone has served as
investment adviser to the Keystone family of mutual funds since 1932 and as
investment adviser to Evergreen Precious Metals since 1984. Keystone is an
indirect wholly-owned subsidiary of First Union National Bank ("FUNB"). FUNB is
a subsidiary of First Union Corporation, the sixth largest bank holding company
in the United States. The Capital Management Group of FUNB, Evergreen Asset
Management Corp. and Keystone manage the Evergreen family of mutual funds with
assets of approximately $40 billion as of November 30, 1997. For further
information regarding Keystone, FUNB and First Union, see "Fund Management and
Expenses - Investment Adviser" in the Prospectus of Evergreen Precious Metals.
Keystone manages investments, provides various administrative services
and supervises the daily business affairs of Evergreen Precious Metals subject
to the authority of the Evergreen International Trust's Board of Trustees.
Evergreen Precious Metals pays Keystone a fee for its services at the annual
rate of 0.75% of the Fund's average daily net assets up to $100,000,000; 0.625%
of net assets between $100,000,000 and $200,000,000; and 0.50% of net assets
over $200,000,000.
Since August 1, 1995, Harbor Capital Management, Inc. ("Harbor
Capital"), located at 125 High Street, Boston, Massachusetts 02110, has served
as a consultant to Keystone with respect to Evergreen Precious Metals pursuant
to a Consultant
<PAGE>
Agreement. Under the Consultant Agreement, Harbor Capital provides Keystone with
monthly reports discussing the world's gold bullion markets and gold stock
markets, and advice regarding economic factors an trends in the precious metals
sector. For its services, Harbor Capital receives from Keystone a fee at the
annual rate of 0.10% of Evergreen Precious Metals' average daily net assets.
Evergreen Precious Metals has no responsibility to pay Harbor Capital's fee.
Virtus serves as the investment adviser for Precious Metals. As
investment adviser, Virtus is responsible for providing or providing for all
management and administrative services for the Fund. In carrying out its
obligations, Virtus provides or arranges for investment research and supervising
the Fund's investments, selects and evaluates the performance of the Fund's
sub-adviser, Cavelti Capital, and conducts or arranges for a continuous program
of appropriate sale or other disposition of the Fund's assets, subject at all
times to the direction of the Board of Directors. Virtus compensates Cavelti
Capital from the advisory fee received from Precious Metals. See "Information
Regarding the Interim Sub-Advisory Agreement." For its services as investment
adviser, Virtus receives a fee at an annual rate of 1.00% of Precious Metals'
average daily net assets up to $150,000,000; 0.875% of net assets between
$150,000,000 and $300,000,000; and 0.75% of net assets over $300,000,000.
Each investment adviser may, at its discretion, reduce or waive its fee
or reimburse a Fund for certain of its other expenses in order to reduce its
expense ratios. Each investment adviser may reduce or cease these voluntary
waivers and reimbursements at any time.
Administrator
Federated Administrative Services ("FAS") provides Precious Metals with
certain administrative personnel and services including certain legal and
accounting services. FAS is entitled to receive a fee for such services at the
following annual rates: 0.15% on the first $250 million of average daily net
assets of the combined assets of the funds in the Blanchard/Virtus mutual fund
family; 0.125% on the next $250 million of such assets, 0.10% on the next $250
million of such assets; and 0.075% on assets in excess of $750 million.
Portfolio Manager
John Madden has been the Portfolio Manager of Evergreen Precious Metals
since 1995 and is a Vice President and Senior Portfolio Manager of Keystone.
Before joining Keystone in 1994, Mr. Madden was an investment analyst and then
Vice President at
<PAGE>
Pioneer Funds, Boston, Massachusetts from 1982 to 1994. He has over 29 years of
investment experience.
Distribution of Shares
Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund
Services, acts as underwriter of the shares of Evergreen Precious Metals. EDI
distributes the Fund's shares directly or through broker-dealers, banks
(including FUNB), or other financial intermediaries. Effective on or about
January 9, 1998, Evergreen Precious Metals will offer three classes of shares:
Class A, Class B, and Class C. Each class has separate distribution
arrangements. (See "Distribution-Related and Shareholder Servicing-Related
Expenses" below.) No class will bear the distribution expenses relating to the
shares of any other class.
In the proposed Reorganization, shareholders of Precious Metals will
receive Class A shares of Evergreen Precious Metals. Class A shares of Evergreen
Precious Metals currently incur Rule 12b-1 fees of 0.25% per year, while shares
of Precious Metals incur 12b-1 fees at the rate of 0.75% per year. Because the
Reorganization will be effected at net asset value without the imposition of a
sales charge, Evergreen Precious Metals shares acquired by shareholders of
Precious Metals pursuant to the proposed Reorganization would not be subject to
any initial sales charge or contingent deferred sales charge as a result of the
Reorganization.
The following is a summary description of charges and fees for the
Class A shares of Evergreen Precious Metals which will be received by Precious
Metals shareholders in the Reorganization. More detailed descriptions of the
distribution arrangements applicable to the classes of shares are contained in
the respective Evergreen Precious Metals Prospectus and the Precious Metals
Prospectus and in each Fund's respective Statement of Additional Information.
Class A Shares. Class A shares are sold at net asset value plus an
initial sales charge and, as indicated below, are subject to
distribution-related fees. For a description of the initial shares charges
applicable to purchases of Class A shares, see "Purchase and Redemption of
Shares - How to Buy Shares" in the Prospectus for Evergreen Precious Metals.
Holders of shares of Precious Metals who receive Class A shares of Evergreen
Precious Metals will be able to purchase additional Class A shares of Evergreen
Precious Metals and of any other Evergreen Fund at net asset value. No initial
sales charge will be imposed.
<PAGE>
Additional information regarding the classes of shares of each Fund is
included in its respective Prospectus and Statement of Additional Information.
Distribution-Related Expenses. Evergreen Precious Metals has adopted a
Rule 12b-1 plan with respect to its Class A shares under which the Class may pay
for distribution-related expenses at an annual rate which may not exceed 0.75%
of average daily net assets attributable to the class. Payments with respect to
Class A shares are currently limited to 0.25% of average daily net assets
attributable to the class, which amount may be increased to the full plan rate
for the Fund by the Trustees without shareholder approval.
Precious Metals has adopted a Rule 12b-1 plan with respect to its
shares under which such shares may pay for distribution- related expenses at an
annual rate of 0.75% of average daily net assets.
Additional information regarding the Rule 12b-1 plans adopted by each
Fund is included in its respective Prospectus and Statement of Additional
Information.
Purchase and Redemption Procedures
Information concerning applicable sales charges and
distribution-related fees is provided above. Investments in the Funds are not
insured. The minimum initial purchase requirement for Evergreen Precious Metals
is $1,000, (except for participants in certain retirement plans, for whom there
is no minimum, and for investments under a Systematic Investment Plan, for which
the minimum is $25) and the minimum investment for Precious Metals is $3,000
($2,000 for qualified pension plans). Precious Metals has a minimum investment
requirement of $200 for subsequent investments. There is no minimum for
subsequent purchases of shares of Evergreen Precious Metals. Each Fund provides
for telephone, mail or wire redemption of shares at net asset value as next
determined after receipt of a redemption request on each day the New York Stock
Exchange ("NYSE") is open for trading. Additional information concerning
purchases and redemptions of shares, including how each Fund's net asset value
is determined, is contained in the respective Prospectus for each Fund. Each
Fund may involuntarily redeem shareholders' accounts that have less than $1,000
of invested funds. All funds invested in each Fund are invested in full and
fractional shares. The Funds reserve the right to reject any purchase order.
Exchange Privileges
<PAGE>
Precious Metals currently permits shareholders to exchange such shares
for shares of another fund in the Blanchard Group of Funds or for Investment
shares of other funds managed by Virtus. In addition, such shares may be
exchanged for shares of Federated Emerging Markets Fund. Holders of shares of a
class of Evergreen Precious Metals generally may exchange their shares for
shares of the same class of any other Evergreen fund. Precious Metals
shareholders will be receiving Class A shares of Evergreen Precious Metals in
the Reorganization and, accordingly, with respect to shares of Evergreen
Precious Metals received by Precious Metals shareholders in the Reorganization,
the exchange privilege is limited to the Class A shares of other Evergreen
funds. No sales charge is imposed on an exchange. An exchange which represents
an initial investment in another Evergreen fund must amount to at least $1,000.
The current exchange privileges, and the requirements and limitations attendant
thereto, are described in each Fund's respective Prospectus and Statement of
Additional Information.
Dividend Policy
Each Fund distributes its net investment income dividends annually.
Distributions of any net realized gains of a Fund will be made at least
annually. Dividends and distributions are reinvested in additional shares of the
same class of the respective Fund, or paid in cash, as a shareholder has
elected. See the respective Prospectus of each Fund for further information
concerning dividends and distributions.
After the Reorganization, shareholders of Precious Metals who have
elected to have their dividends and/or distributions reinvested will have
dividends and/or distributions received from Evergreen Precious Metals
reinvested in shares of Evergreen Precious Metals. Shareholders of Precious
Metals who have elected to receive dividends and/or distributions in cash will
receive dividends and/or distributions from Evergreen Precious Metals in cash
after the Reorganization, although they may, after the Reorganization, elect to
have such dividends and/or distributions reinvested in additional shares of
Evergreen Precious Metals.
Each of Evergreen Precious Metals and Precious Metals has qualified and
intends to continue to qualify to be treated as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"). While so
qualified, so long as each Fund distributes all of its net investment company
taxable income and any net realized gains to shareholders, it is expected that a
Fund will not be required to pay any federal income taxes on the amounts so
distributed. A 4% nondeductible excise tax will be imposed on amounts not
distributed if a Fund does not
<PAGE>
meet certain distribution requirements by the end of each calendar year. Each
Fund anticipates meeting such distribution requirements.
Risks
Since the investment objectives and policies of each Fund are similar,
the risks involved in investing in each Fund's shares are similar. For a
discussion of each Fund's objectives and policies, see "Comparison of Investment
Objectives and Policies." There is no assurance that investment performances
will be positive and that the Funds will meet their investment objectives.
Precious Metals. The profits of the companies in which the Funds invest, and
ultimately the value of the securities of the Funds, are directly affected by
the price of gold and other precious metals and minerals. The price of gold and
other precious metals and minerals, in turn, is subject to substantial
short-term volatility caused by various conditions, including: monetary and
political developments within a particular country and among various countries,
such as currency devaluations or revaluations and exchange controls; economic
and social conditions such as industrial and commercial demand, and investment
and speculation; and trade restrictions between countries. Because a significant
portion of the world's gold ore reserves are located in South Africa, the
political, social and economic conditions there can affect local and other gold
and gold-related companies.
Foreign Securities. Both Funds invest in foreign securities. Securities
markets of foreign countries in which the Funds may invest are generally not
subject to the same degree of regulation as the U.S. markets and may be more
volatile and less liquid than the major U.S. markets. The differences between
investing in foreign and U.S. companies include: (1) less publicly available
information about foreign companies; (2) the lack of uniform financial
accounting standards and practices among countries which could impair the
validity of direct comparisons of valuations measures (such as price/earnings
ratios) for securities in different countries; (3) less readily available market
quotations on foreign companies; (4) differences in government regulation and
supervision of foreign stock exchanges, brokers, listed companies, and banks;
(5) differences in legal systems which may affect the ability to enforce
contractual obligations or obtain court judgments; (6) generally lower foreign
stock market volume; (7) the likelihood that foreign securities may be less
liquid or more volatile, which may affect the Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price; (8) transaction
costs, including brokerage charges and custodian charges associated with
<PAGE>
holding foreign securities, may be higher; (9) the settlement period for foreign
securities, which are sometimes longer than those for securities of U.S.
issuers, may affect portfolio liquidity; (10) the possibility that foreign
securities held by a Fund may be traded on days that the Fund does not value its
portfolio securities, such as Saturdays and customary business holidays, and
accordingly, the Fund's net asset value may be significantly affected on days
when shareholders do not have access to the Fund; and (11) political and social
instability, expropriation, and political or financial changes which adversely
affect investment in some countries.
Emerging Markets. Investing in securities of issuers in emerging
markets countries involves exposure to economic systems that are generally less
stable than those of developed countries. Investing in companies in emerging
markets countries may involve exposure to national policies that may restrict
investment by foreigners and undeveloped legal systems governing private and
foreign investments and private property. The typically small size of the
markets for securities issued by companies in emerging markets countries and the
possibility of a low or nonexistent volume of trading in those securities may
also result in a lack of liquidity and in price volatility for those securities.
Precious Metals is a non-diversified investment company. As such, there is
no limit on the percentage of assets which can be invested in the securities of
a single issuer. An investment in Precious Metals, therefore, will entail
greater risk than would exist in a diversified investment company because the
higher percentage of investments among fewer issuers may result in greater
fluctuations in the total market value of its shares. Any adverse developments
affecting the value of the securities held by Precious Metals will have a
greater impact on the total value of Precious Metals than would be the case if
Precious Metals' investments were diversified among more issuers.
Additional Information. Further information about these risks, as well as
other risks relating to an investment in Evergreen Precious Metals, is set forth
in the Prospectus of Evergreen Precious Metals at "Risk Factors."
REASONS FOR THE REORGANIZATION
On July 18, 1997, First Union entered into an Agreement and Plan of
Merger with Signet, which provided, among other things, for the Merger of Signet
with and into a wholly-owned subsidiary of First Union. The Merger was
consummated on November 28, 1997. As a result of the Merger it is expected that
FUNB and its affiliates will succeed to the investment advisory and
<PAGE>
administrative functions currently performed for Precious Metals by various
units of Signet and various unaffiliated parties. It is also expected that
Signet will no longer, upon completion of the Reorganization and similar
reorganizations of other funds in the Signet mutual fund family, provide
investment advisory or administrative services to investment companies.
At a regular meeting held on September 16, 1997, the Board of Directors
of Precious Metals considered and approved the Reorganization as in the best
interests of shareholders of Precious Metals and determined that the interests
of existing shareholders of Precious Metals will not be diluted as a result of
the transactions contemplated by the Reorganization. In addition, the Directors
approved the Interim Advisory Agreement and Interim Sub-Advisory Agreement with
respect to Precious Metals.
As noted above, Signet has merged with and into a wholly-owned
subsidiary of First Union. Signet is the parent company of Virtus, investment
adviser to the mutual funds which comprise Blanchard Funds. The Merger caused,
as a matter of law, termination of the investment advisory agreement between
Precious Metals and Virtus and the sub-advisory agreement between Virtus and
Cavelti Capital. Precious Metals has received an order from the SEC which
permits Virtus and Cavelti Capital to continue to act as Precious Metals'
investment adviser and sub-adviser, respectively, without shareholder approval,
for a period of not more than 120 days from the date the Merger was consummated
(November 28, 1997) to the date of shareholder approval of a new investment
advisory agreement and sub-advisory agreement. Accordingly, the Directors
considered the recommendations of Signet in approving the proposed
Reorganization.
In approving the Plan, the Directors reviewed various factors about the
Funds and the proposed Reorganization. There are substantial similarities
between Evergreen Precious Metals and Precious Metals. Specifically, Evergreen
Precious Metals and Precious Metals have similar investment objectives and
policies and comparable risk profiles. See "Comparison of Investment Objectives
and Policies" below. At the same time, the Board of Directors evaluated the
potential economies of scale associated with larger mutual funds and concluded
that operational efficiencies may be achieved upon the combination of Precious
Metals with an Evergreen fund with a greater level of assets. As of September
30, 1997, Evergreen Precious Metals' net assets were approximately $139.8
million and Precious Metals' net assets were approximately $67.0 million.
In addition, assuming that an alternative to the Reorganization would
be to propose that Precious Metals continue
<PAGE>
its existence and be separately managed by Evergreen Asset or one of its
affiliates, Precious Metals would be offered through common distribution
channels with the similar Evergreen Precious Metals. Precious Metals would also
have to bear the cost of maintaining its separate existence. Signet and Keystone
believe that the prospect of dividing the resources of the Evergreen mutual fund
organization between two substantially similar funds could result in each Fund
being disadvantaged due to an inability to achieve optimum size, performance
levels and the greatest possible economies of scale. Accordingly, for the
reasons noted above and recognizing that there can be no assurance that any
economies of scale or other benefits will be realized, Signet and Keystone
believe that the proposed Reorganization would be in the best interests of each
Fund and its shareholders.
The Board of Directors of Precious Metals met and considered the
recommendation of Signet and Keystone and, in addition, considered among other
things, (i) the terms and conditions of the Reorganization; (ii) whether the
Reorganization would result in the dilution of shareholders' interests; (iii)
expense ratios, fees and expenses of Evergreen Precious Metals and Precious
Metals; (iv) the comparative performance records of each of the Funds; (v)
compatibility of their investment objectives and policies; (vi) the investment
experience, expertise and resources of Keystone; (vii) the service and
distribution resources available to the Evergreen funds and the broad array of
investment alternatives available to shareholders of the Evergreen funds; (viii)
the personnel and financial resources of First Union and its affiliates; (ix)
the fact that FUNB will bear the expenses incurred by Precious Metals in
connection with the Reorganization; (x) the fact that Evergreen Precious Metals
will assume certain identified liabilities of Precious Metals; and (xi) the
expected federal income tax consequences of the Reorganization.
The Directors also considered the benefits to be derived by
shareholders of Precious Metals from the sale of its assets to Evergreen
Precious Metals. In this regard, the Directors considered the potential benefits
of being associated with a larger entity and the economies of scale that could
be realized by the participation in such an entity by shareholders of Precious
Metals.
In addition, the Directors considered that there are alternatives
available to shareholders of Precious Metals, including the ability to redeem
their shares, as well as the option to vote against the Reorganization.
During their consideration of the Reorganization the Directors met with
Fund counsel and counsel to the Independent
<PAGE>
Directors regarding the legal issues involved. The Trustees of Evergreen
International Trust, on behalf of Evergreen Precious Metals also concluded at a
meeting on September 17, 1997 that the proposed Reorganization would be in the
best interests of shareholders of Evergreen Precious Metals and that the
interests of the shareholders of Evergreen Precious Metals would not be diluted
as a result of the transactions contemplated by the Reorganization.
THE BOARD OF DIRECTORS OF PRECIOUS METALS
RECOMMENDS THAT THE SHAREHOLDERS APPROVE
THE PROPOSED REORGANIZATION.
Agreement and Plan of Reorganization
The following summary is qualified in its entirety by reference to the
Plan (Exhibit A hereto).
The Plan provides that Evergreen Precious Metals will acquire all of
the assets of Precious Metals in exchange for shares of Evergreen Precious
Metals and the assumption by Evergreen Precious Metals of certain identified
liabilities of Precious Metals on or about February 27, 1998 or such other date
as may be agreed upon by the parties (the "Closing Date"). Prior to the Closing
Date, Precious Metals will endeavor to discharge all of its known liabilities
and obligations. Evergreen Precious Metals will not assume any liabilities or
obligations of Precious Metals other than those reflected in an unaudited
statement of assets and liabilities of Precious Metals prepared as of the close
of regular trading on the NYSE, currently 4:00 p.m. Eastern time, on the
business day immediately prior to the Closing Date. The number of full and
fractional shares of each class of Evergreen Precious Metals to be received by
the shareholders of Precious Metals will be determined by multiplying the
respective outstanding class of shares of Precious Metals by a factor which
shall be computed by dividing the net asset value per share of the respective
class of shares of Precious Metals by the net asset value per share of the
respective class of shares of Evergreen Precious Metals. Such computations will
take place as of the close of regular trading on the NYSE on the business day
immediately prior to the Closing Date. The net asset value per share of each
class will be determined by dividing assets, less liabilities, in each case
attributable to the respective class, by the total number of outstanding shares.
State Street Bank and Trust Company, the custodian for Evergreen
Precious Metals, will compute the value of each Fund's respective portfolio
securities. The method of valuation employed will be consistent with the
procedures set forth in the Prospectus and Statement of Additional Information
of Evergreen
<PAGE>
Precious Metals, Rule 22c-1 under the 1940 Act, and with the interpretations of
such Rule by the SEC's Division of Investment Management.
At or prior to the Closing Date, Precious Metals will have declared a
dividend or dividends and distribution or distributions which, together with all
previous dividends and distributions, shall have the effect of distributing to
the Fund's shareholders (in shares of the Fund, or in cash, as the shareholder
has previously elected) all of the Fund's net investment company taxable income
for the taxable period ending on the Closing Date (computed without regard to
any deduction for dividends paid) and all of its net capital gains realized in
all taxable periods ending on the Closing Date (after reductions for any capital
loss carryforward).
As soon after the Closing Date as conveniently practicable, Precious
Metals will liquidate and distribute pro rata to shareholders of record as of
the close of business on the Closing Date the full and fractional shares of
Evergreen Precious Metals received by Precious Metals. Such liquidation and
distribution will be accomplished by the establishment of accounts in the names
of the Fund's shareholders on the share records of Evergreen Precious Metals'
transfer agent. Each account will represent the respective pro rata number of
full and fractional shares of Evergreen Precious Metals due to the Fund's
shareholders. All issued and outstanding shares of Precious Metals, including
those represented by certificates, will be canceled. The shares of Evergreen
Precious Metals to be issued will have no preemptive or conversion rights. After
such distributions and the winding up of its affairs, Precious Metals will be
terminated. In connection with such termination, Precious Metals will file with
the SEC an application for termination as a registered investment company.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan, including approval by Precious Metals' shareholders, accuracy
of various representations and warranties and receipt of opinions of counsel,
including opinions with respect to those matters referred to in "Federal Income
Tax Consequences" below. Notwithstanding approval of Precious Metals'
shareholders, the Plan may be terminated (a) by the mutual agreement of Precious
Metals and Evergreen Precious Metals; or (b) at or prior to the Closing Date by
either party (i) because of a breach by the other party of any representation,
warranty, or agreement contained therein to be performed at or prior to the
Closing Date if not cured within 30 days, or (ii) because a condition to the
obligation of the terminating party has not been met and it reasonably appears
that it cannot be met.
<PAGE>
The expenses of Precious Metals in connection with the Reorganization
(including the cost of any proxy soliciting agent) will be borne by FUNB whether
or not the Reorganization is consummated. No portion of such expenses will be
borne directly or indirectly by Precious Metals or its shareholders. There are
no liabilities or expected reimbursements in connection with the 12b-1 Plan of
Precious Metals. As a result, no 12b-1 liabilities will be assumed by Evergreen
Precious Metals following the Reorganization.
If the Reorganization is not approved by shareholders of Precious
Metals, the Board of Directors of Precious Metals will consider other possible
courses of action in the best interests of shareholders.
Federal Income Tax Consequences
The Reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under section 368(a) of the Code. As a
condition to the closing of the Reorganization, Precious Metals will receive an
opinion of counsel to the effect that, on the basis of the existing provisions
of the Code, U.S. Treasury regulations issued thereunder, current administrative
rules, pronouncements and court decisions, for federal income tax purposes, upon
consummation of the Reorganization:
(1) The transfer of all of the assets of Precious Metals solely in
exchange for shares of Evergreen Precious Metals and the assumption by Evergreen
Precious Metals of certain identified liabilities, followed by the distribution
of Evergreen Precious Metals' shares by Precious Metals in dissolution and
liquidation of Precious Metals, will constitute a "reorganization" within the
meaning of section 368(a)(1)(C) of the Code, and Evergreen Precious Metals and
Precious Metals will each be a "party to a reorganization" within the meaning of
section 368(b) of the Code;
(2) No gain or loss will be recognized by Precious Metals on the
transfer of all of its assets to Evergreen Precious Metals solely in exchange
for Evergreen Precious Metals' shares and the assumption by Evergreen Precious
Metals of certain identified liabilities of Precious Metals or upon the
distribution of Evergreen Precious Metals' shares to Precious Metals'
shareholders in exchange for their shares of Precious Metals;
(3) The tax basis of the assets transferred will be the same to
Evergreen Precious Metals as the tax basis of such assets to Precious Metals
immediately prior to the Reorganization, and the holding period of such assets
in the hands of Evergreen Precious Metals will include the period during which
the assets were held by Precious Metals;
<PAGE>
(4) No gain or loss will be recognized by Evergreen Precious Metals
upon the receipt of the assets from Precious Metals solely in exchange for the
shares of Evergreen Precious Metals and the assumption by Evergreen Precious
Metals of certain identified liabilities of Precious Metals;
(5) No gain or loss will be recognized by Precious Metals' shareholders
upon the issuance of the shares of Evergreen Precious Metals to them, provided
they receive solely such shares (including fractional shares) in exchange for
their shares of Precious Metals; and
(6) The aggregate tax basis of the shares of Evergreen Precious Metals,
including any fractional shares, received by each of the shareholders of
Precious Metals pursuant to the Reorganization will be the same as the aggregate
tax basis of the shares of Precious Metals held by such shareholder immediately
prior to the Reorganization, and the holding period of the shares of Evergreen
Precious Metals, including fractional shares, received by each such shareholder
will include the period during which the shares of Precious Metals exchanged
therefor were held by such shareholder (provided that the shares of Precious
Metals were held as a capital asset on the date of the Reorganization).
Opinions of counsel are not binding upon the Internal Revenue Service
or the courts. If the Reorganization is consummated but does not qualify as a
tax-free reorganization under the Code, a shareholder of Precious Metals would
recognize a taxable gain or loss equal to the difference between his or her tax
basis in his or her Fund shares and the fair market value of Evergreen Precious
Metals shares he or she received. Shareholders of Precious Metals should consult
their tax advisers regarding the effect, if any, of the proposed Reorganization
in light of their individual circumstances. It is not anticipated that the
securities of the combined portfolio will be sold in significant amounts in
order to comply with the policies and investment practices of Evergreen Precious
Metals. Since the foregoing discussion relates only to the federal income tax
consequences of the Reorganization, shareholders of Precious Metals should also
consult their tax advisers as to the state and local tax consequences, if any,
of the Reorganization.
Pro-forma Capitalization
The following table sets forth the capitalizations of Evergreen
Precious Metals and Precious Metals as of September 30, 1997 and the
capitalization of Evergreen Precious Metals on a pro forma basis as of that
date, giving effect to the proposed acquisition of assets at net asset value and
the conversion of certain Evergreen Precious Metals Class B shares to Class A
<PAGE>
shares. See "Comparison of Fees and Expenses." The pro forma data reflects an
exchange ratio of approximately 0.28 Class A shares of Evergreen Precious Metals
issued for each share of Precious Metals.
<TABLE>
<CAPTION>
Capitalization of Precious Metals,
Evergreen Precious Metals and Evergreen
Precious Metals (Pro Forma)
Evergreen
Precious
Evergreen Metals (After
Precious Precious Reorgani-
Metals Metals zation)
--------- -------- ------------
<S> <C> <C> <C>
Net Assets
Shares......................... $67,037,240 N/A N/A
Class A........................ N/A N/A $141,860,060
Class B........................ N/A $138,766,357 $63,943,537
------------ ------------ -------------
Total Net Assets $67,037,240 $138,766,357 $205,803,597
Net Asset Value Per
Share
Shares......................... $5.37 N/A N/A
Class A........................ N/A N/A $19.18
Class B........................ N/A $19.18 $19.18
Shares Outstanding
Shares......................... 12,486,361 N/A N/A
Class A........................ N/A 7,233,396 $7,396,168
Class B........................ N/A N/A $3,333,149
------------ ------------ -------------
All Classes.................... 12,486,361 7,233,396 10,729,317
</TABLE>
The table set forth above should not be relied upon to reflect the
number of shares to be received in the Reorganization; the actual number of
shares to be received will depend upon the net asset value and number of shares
outstanding of each Fund at the time of the Reorganization.
Shareholder Information
As of December 26, 1997 (the "Record Date"), there were shares of
beneficial interest of Precious Metals outstanding.
As of October 31, 1997, the officers and Directors of Precious Metals
beneficially owned as a group less than 1% of the
<PAGE>
outstanding shares of Precious Metals. To Precious Metals' knowledge, the
following persons owned beneficially or of record more than 5% of Precious
Metals' total outstanding shares as of October 31, 1997:
<TABLE>
<CAPTION>
Percentage
of Shares
Percentage of Class
of Shares Outstanding
Before After
No. of Reorgan- Reorgan-
Name and Address Shares ization ization
<S> <C> <C> <C>
Charles Schwab 1,163,337.2530 9.60%
Co. Inc.
101 Montgomery St.
San Francisco, CA
94104-4122
National Financial 727,617.8920 6.00%
Services Corp. for
the Exclusive
Benefit of
Customers
Fifth Floor
200 Liberty St.
One World Financial
Center
New York, NY
10281-1003
</TABLE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its entirety by
the descriptions of the respective investment objectives, policies and
restrictions set forth in the respective Prospectus and Statement of Additional
Information of each Fund. The investment objective, policies and restrictions of
Evergreen Precious Metals can be found in the Prospectus of Evergreen Precious
Metals under the caption "Investment Objectives and Policies." The investment
objective, policies and restrictions of Precious Metals can be found in the
Prospectus of the Fund under the caption "The Funds' Investment Objectives and
Policies." Unlike the investment objective of Precious Metals, which is
fundamental, the investment objectives of Evergreen
<PAGE>
Precious Metals are non-fundamental and can be changed by the Board of Trustees
without shareholder approval.
The investment objectives of Evergreen Precious Metals are to provide
shareholders with long-term capital appreciation and with protection of the
purchasing power of their capital and, as a secondary objective, to obtain
current income. Under normal circumstances, Evergreen Precious Metals pursues
its objectives by investing at least 80% of its assets in common stocks of
companies that are engaged in, or which receive at least 50% of their revenue
from other companies engaged in, exploration, mining, processing or dealing in
precious metals (gold, silver, platinum and palladium) and minerals, such as
diamonds. For purposes of this policy, a company is considered to be engaged in
a business or activity if at least 50% of the company's assets, revenues or
profits are derived from that business or activity.
Currently, Evergreen Precious Metals has a policy of investing a
portion of its assets in domestic or foreign issuers that operate in the
Republic of South Africa, the principal location of the known free-world gold
ore reserves. Evergreen Precious Metals generally makes such investments by
purchasing American Depository Receipts. Evergreen Precious Metals does not
invest directly in precious metals, but may invest up to 25% of its total assets
in common or preferred stock of wholly-owned subsidiaries that make such
investments. Currently, Evergreen Precious Metals has one such subsidiary,
Precious Metals (Bermuda) Ltd.
The investment objective of Precious Metals is to provide long-term
capital appreciation and preservation of purchasing power through investments in
physical precious metals and securities of companies involved with precious
metals.
A secondary objective of Precious Metals is to reduce the risk of loss
of capital and decrease the volatility often associated with precious metals
investments by changing the allocation of the Fund's assets from precious metals
securities to physical precious metals investments and/or investing in
short-term instruments and government securities during periods when the
sub-adviser believes the precious metals markets may experience declines.
For the purpose of Precious Metals, the term "precious metals
securities" refers to the debt and equity securities of domestic and foreign
companies listed on domestic and foreign exchanges which are directly involved
in the exploration, development, mining, refining, manufacturing, dealing or
marketing of precious metals or precious metals products. A company will be
considered to be "involved in" such activity if
<PAGE>
it derives more than 50% of its revenues from or devotes more than 50% of its
assets to such activity. The Fund may invest in (1) publicly-traded common
stocks, (2) securities convertible into common stocks, such as convertible
preferred stock, convertible debentures, convertible rights and warrants (to the
extent permissible by the Fund's investment policies), and (3) debt securities
of such companies, all of which are believed by the Sub-Adviser to have the
potential for appreciation.
Precious Metals, unlike Evergreen Precious Metals, may, from time to
time, invest up to 5% of its assets in unrated foreign debt securities which are
judged by the Fund's sub-adviser to be of at least comparable quality to
lower-rated U.S. debt securities (usually defined as Baa or lower by Moody's
Investors Service or BBB or lower by Standard & Poor's Ratings Group). Precious
Metals may invest up to 49% of its total assets in physical precious metals
through holdings in bullion or precious metals certificates or storage receipts
representing the physical metals.
Precious Metals and Evergreen Precious Metals may purchase contracts
for forward delivery of physical precious metals. Forward contracts for precious
metals are contracts between the Fund and institutions dealing in precious
metals for the future receipt or delivery of metals at a price fixed at the time
of the transaction.
Both Funds may invest in derivatives such as options and futures.
Under normal conditions, Precious Metals has at least 65% of its total
assets invested in precious metals securities and physical precious metals
investments. Under other circumstances, the Fund may invest up to 100% of its
assets in short-term instruments, including commercial paper, bank certificates
of deposit, bankers' acceptances and securities of the U.S. government and its
agencies and instrumentalities as well as cash and cash equivalents denominated
in foreign currency.
Neither Evergreen Precious Metals nor Precious Metals may invest more
than 5% of its assets in securities of any one issuer or purchase more than 10%
of the outstanding voting securities of any one issuer. However, because
Precious Metals is a non-diversified portfolio for purposes of the 1940 Act,
these restrictions apply to 50% of the assets of Precious Metals. As a
diversified portfolio under the 1940 Act, the same restrictions apply to 75% of
the assets of Evergreen Precious Metals. Nondiversification may increase
investment risks.
<PAGE>
The characteristics of each investment policy and the associated risks
are described in each Fund's respective Prospectus and Statement of Additional
Information. The Funds have other investment policies and restrictions which are
also set forth in the Prospectus and Statement of Additional Information of each
Fund.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
Forms of Organization
Evergreen International Trust (the "Trust") and Precious Metals are
both open-end management investment companies registered with the SEC under the
1940 Act which continuously offer shares to the public. The Trust is organized
as a Delaware business trust, and Precious Metals is organized as a Maryland
corporation. The Trust is governed by a Declaration of Trust, By-Laws and a
Board of Trustees. The Trust is also governed by applicable Delaware and federal
law. Evergreen Precious Metals is a series of the Trust. Precious Metals is
governed by its Articles of Incorporation, By-Laws and a Board of Directors, as
well as applicable Maryland and federal law.
As set forth in the supplement to the Prospectus of Evergreen Precious
Metals, effective December 22, 1997, Keystone Precious Metals Holdings, Inc.,
was reorganized (the "Delaware Reorganization") from a Delaware corporation into
a series (Evergreen Precious Metals Fund) of the Trust. In connection with the
Delaware Reorganization, the Fund's investment objectives were reclassified from
"fundamental" to "non- fundamental" and therefore may be changed without
shareholder approval; the Fund adopted certain standardized investment
restrictions; and the Fund eliminated or reclassified from fundamental to
non-fundamental certain of the Fund's other fundamental investment restrictions.
Capitalization
The beneficial interests in Evergreen Precious Metals are represented
by an unlimited number of transferable shares of beneficial interest, $.001 par
value per share. Precious Metals' authorized shares consist of 1,000,000,000
shares of common stock, par value $.001 per share. The Trust's Declaration of
Trust and Precious Metals' Articles of Incorporation permit the Trustees or
Directors respectively, to allocate shares into an unlimited number of series,
and classes thereof, with rights determined by the Trustees or Directors, all
without shareholder approval. Currently, Precious Metals has only a single
series. Fractional shares may be issued by either Fund. Each Fund's shares
represent equal proportionate interests in the assets
<PAGE>
belonging to the Funds. Shareholders of each Fund are entitled to receive
dividends and other amounts as determined by the Trustees or Directors.
Shareholders of each Fund vote separately, by class, as to matters, such as
approval of or amendments to Rule 12b-1 distribution plans, that affect only
their particular class and by series as to matters, such as approval of or
amendments to investment advisory agreements or proposed reorganizations, that
affect only their particular series.
Shareholder Liability
Under Delaware law, shareholders of a Delaware business trust are
entitled to the same limitation of personal liability extended to stockholders
of Delaware corporations. No similar statutory or other authority limiting
business trust shareholder liability exists in any other state. As a result, to
the extent that the Trust or a shareholder is subject to the jurisdiction of
courts in those states, the courts may not apply Delaware law, and may thereby
subject shareholders of a Delaware trust to liability. To guard against this
risk, the Declaration of Trust of the Trust (a) provides that any written
obligation of the Trust may contain a statement that such obligation may only be
enforced against the assets of the Trust or the particular series in question
and the obligation is not binding upon the shareholders of the Trust; however,
the omission of such a disclaimer will not operate to create personal liability
for any shareholder; and (b) provides for indemnification out of Trust property
of any shareholder held personally liable for the obligations of the Trust.
Accordingly, the risk of a shareholder of the Trust incurring financial loss
beyond that shareholder's investment because of shareholder liability is limited
to circumstances in which: (i) the court refuses to apply Delaware law; (ii) no
contractual limitation of liability was in effect; and (iii) the Trust itself
would be unable to meet its obligations. In light of Delaware law, the nature of
the Trust's business, and the nature of its assets, the risk of personal
liability to a shareholder of the Trust is remote.
Shareholder Meetings and Voting Rights
Neither the Trust on behalf of Evergreen Precious Metals nor Precious
Metals is required to hold annual meetings of shareholders. However, a meeting
of shareholders for the purpose of voting upon the question of removal of a
Trustee or Director, respectively, must be called when requested in writing by
the holders of at least 10% of the outstanding shares of the Trust or Precious
Metals. In addition, each is required to call a meeting of shareholders for the
purpose of electing Trustees or Directors if, at any time, less than a majority
of the Trustees or
<PAGE>
Directors then holding office were elected by shareholders. Neither the Trust
nor Precious Metals currently intends to hold regular shareholder meetings.
Neither the Trust nor Precious Metals permits cumulative voting. For Evergreen
Precious Metals and Precious Metals, a majority of the votes cast and entitled
to vote is sufficient to act on a matter (unless otherwise specifically required
by the applicable governing documents or other law, including the 1940 Act).
Under the Declaration of Trust of the Trust, each share of Evergreen
Precious Metals is entitled to one vote for each dollar of net asset value
applicable to each share. Under the voting provisions governing Precious Metals,
each share is entitled to one vote. The net asset values of the mutual funds
that are a series of the Trust have different net asset values per share and can
be expected to change in relation to one another in the future. Because of the
divergence in net asset values, a given dollar investment in a fund with a lower
net asset value will purchase more shares and under the Precious Metals' voting
provisions have more votes, than the same investment in a fund with a higher net
asset value. Under the Declaration of Trust of the Trust, voting power is
related to the dollar value of a shareholder's investment rather than to the
number of shares held.
Liquidation or Dissolution
In the event of the liquidation of Evergreen Precious Metals or
Precious Metals the shareholders are entitled to receive, when, and as declared
by the Trustees or directors, respectively the excess of the assets belonging to
such Fund or attributable to the class over the liabilities belonging to the
Fund or attributable to the class. In either case, the assets so distributable
to shareholders of the Fund will be distributed among the shareholders in
proportion to the number of shares of a class of the Fund held by them and
recorded on the books of the Fund.
Liability and Indemnification of Trustees and Directors
The Articles of Incorporation of Precious Metals provide that no
Director or officer shall be liable unless such Director or officer is found to
have acted in bad faith, with willful misfeasance, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
The Articles of Incorporation of Precious Metals provides that a
present or former Director or officer is entitled to indemnification against
liabilities and expenses with respect to claims related to his or her position
with the Fund, provided
<PAGE>
that no indemnification shall be provided to a Director or officer against any
liability to the Fund or the shareholders by reasons of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
Under the Declaration of Trust of the Trust, a Trustee is liable to the
Trust and its shareholders only for such Trustee's own willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of the office of Trustee or the discharge of such Trustee's functions.
As provided in the Declaration of Trust, each Trustee of the Trust is entitled
to be indemnified against all liabilities against him or her, including the
costs of litigation, unless it is determined that the Trustee (i) did not act in
good faith in the reasonable belief that such Trustee's action was in or not
opposed to the best interests of the Trust; (ii) had acted with willful
misfeasance, bad faith, gross negligence or reckless disregard of such Trustee's
duties; and (iii) in a criminal proceeding, had reasonable cause to believe that
such Trustee's conduct was unlawful (collectively, "disabling conduct"). A
determination that the Trustee did not engage in disabling conduct and is,
therefore, entitled to indemnification may be based upon the outcome of a court
action or administrative proceeding or by (a) a vote of a majority of those
Trustees who are neither "interested persons" within the meaning of the 1940 Act
nor parties to the proceeding or (b) an independent legal counsel in a written
opinion. The Trust may also advance money for such litigation expenses provided
that the Trustee undertakes to repay the Trust if his or her conduct is later
determined to preclude indemnification and certain other conditions are met.
The foregoing is only a summary of certain characteristics of the
operations of the Declaration of Trust of the Trust, Articles of Incorporation
of Precious Metals, By-Laws, and Delaware and Maryland law and is not a complete
description of those documents or law. Shareholders should refer to the
provisions of such Declaration of Trust, Articles of Incorporation, By-Laws, and
Delaware and Maryland law directly for more complete information.
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT
Introduction
In view of the Merger discussed above, and the factors discussed below,
the Board of Directors of Precious Metals recommends that shareholders of
Precious Metals approve the Interim Advisory Agreement. The Merger became
effective on November 28, 1997. Pursuant to an order received from the SEC
<PAGE>
all fees payable under the Interim Advisory Agreement will be placed in escrow
and paid to Virtus if shareholders approve the contract within 120 days of its
effective date. The Interim Advisory Agreement will remain in effect until the
earlier of the Closing Date for the Reorganization or two years from the
effective date. The terms of the Interim Advisory Agreement are essentially the
same as the Previous Advisory Agreement (as defined below). The only difference
between the Previous Advisory Agreement and the Interim Advisory Agreement, if
approved by shareholders, is the length of time each Agreement is in effect. A
description of the Interim Advisory Agreement pursuant to which Virtus continues
as investment adviser to Precious Metals, as well as the services to be provided
by Virtus pursuant thereto is set forth below under "Advisory Services." The
description of the Interim Advisory Agreement in this Prospectus/Proxy Statement
is qualified in its entirety by reference to the Interim Advisory Agreement,
attached hereto as Exhibit B.
Virtus, a Maryland corporation formed in 1995 to succeed to the
business of Signet Asset Management, is an indirect wholly-owned subsidiary of
First Union. The address of Virtus is 707 East Main Street, Suite 1300,
Richmond, Virginia 23219. Virtus has served as investment adviser pursuant to an
Investment Advisory Contract dated July 12, 1995. As used herein, the Investment
Advisory Agreement, as amended, for Precious Metals is referred to as the
"Previous Advisory Agreement." At a meeting of the Board of Directors of
Precious Metals held on September 16, 1997, the Directors, including a majority
of the Independent Directors, approved the Interim Advisory Agreement for
Precious Metals.
The Directors have authorized Precious Metals to enter into the Interim
Advisory Agreement with Virtus. Such Agreement became effective on November 28,
1997. If the Interim Advisory Agreement for Precious Metals is not approved by
shareholders, the Directors will consider appropriate actions to be taken with
respect to Precious Metals' investment advisory arrangements at that time. The
Previous Advisory Agreement was last approved by the Directors, including a
majority of the Independent Directors on May 11, 1997.
Comparison of the Interim Advisory Agreement and the Previous Advisory Agreement
Advisory Services. The management and advisory services to be provided by
Virtus under the Interim Advisory Agreement are identical to those currently
provided by Virtus under the Previous Advisory Agreement. Under the Previous
Advisory Agreement and Interim Advisory Agreement, Virtus is responsible
<PAGE>
for managing Precious Metals and overseeing the investment of its assets,
subject at all times to the supervision of the Board of Directors. Virtus
selects, monitors and evaluates the Fund's sub-adviser. Virtus periodically
reviews the sub-adviser's performance record and will make a change, if
necessary, subject to approval of the Board of Directors and shareholders.
FAS currently acts as administrator of Precious Metals. FAS will
continue during the term of the Interim Advisory Agreement as Precious Metals'
administrator for the same compensation as currently received, except that on
February 9, 1998, the obligations of FAS to provide transfer agency services for
Precious Metals shareholders will terminate and such services will be provided
for the same fees by Evergreen Service Company.
See "Summary - Administrator."
Fees and Expenses. The investment advisory fees and expense limitations for
Precious Metals under the Previous Advisory Agreement and the Interim Advisory
Agreement are identical. See "Summary - Investment Advisers and Sub-Adviser."
Expense Reimbursement. Virtus may, if it deems appropriate, assume
expenses of Precious Metals to the extent that the Fund's expenses exceed such
lower expense limitation as Virtus may, by notice to the Precious Metals,
voluntarily declare to be effective.
The Interim Advisory Agreement contains an identical provision.
Payment of Expenses and Transaction Charges. Under the Previous Advisory
Agreement, Precious Metals was required to pay or cause to be paid all of its
own expenses.
The Interim Advisory Agreement contains an identical provision.
Limitation of Liability. The Previous Advisory Agreement provided that
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties under the Agreement on the part of Virtus,
Virtus was not liable to Precious Metals or to any shareholder for any act or
omission in the course of or connected in any way with rendering services or for
any losses that may be sustained in the purchase, holding or sale of any
security.
The Interim Advisory Agreement contains an identical provision.
<PAGE>
Termination; Assignment. The Interim Advisory Agreement provides that
it may be terminated without penalty by vote of a majority of the outstanding
voting securities of Precious Metals (as defined in the 1940 Act) or by a vote
of its Board of Directors on 60 days' written notice to Virtus or by Virtus on
60 days' written notice to Precious Metals. Also, the Interim Advisory Agreement
will automatically terminate in the event of its assignment (as defined in the
1940 Act). The Previous Advisory Agreement contained identical provisions as to
termination and assignment.
Information about Precious Metals' Investment Adviser
Virtus, a registered investment adviser, manages, in addition to the
Fund, other funds of The Virtus Funds, the Blanchard Group of Funds and three
fixed income trust funds. The name and address of each executive officer and
director of Virtus are set forth in Appendix A to this Prospectus/Proxy
Statement.
For the fiscal year ended September 30, 1997 and the period from May 1,
1996 to September 30, 1996, Virtus received from Precious Metals management fees
of $744,283 and $959,625, respectively. For the fiscal year ended April 30,
1996, the Fund's investment management fee paid to Virtus and the prior manager
was $823,292. Signet acts as custodian for Precious Metals and received $50,200
for the fiscal year ended September 30, 1997. Signet will continue to act as
Precious Metals' custodian during the term of the Interim Advisory Agreement.
The Board of Directors considered the Interim Advisory Agreement as
part of its overall approval of the Plan. The Board of Directors considered,
among other things, the factors set forth above in "Reasons for the
Reorganization." The Board of Directors also considered the fact that there were
no material differences between the terms of the Interim Advisory Agreement and
the terms of the Previous Advisory Agreement.
THE DIRECTORS OF PRECIOUS METALS RECOMMEND
THAT SHAREHOLDERS APPROVE THE
INTERIM ADVISORY AGREEMENT.
INFORMATION REGARDING THE INTERIM SUB-ADVISORY AGREEMENT
Introduction
In view of the Merger discussed above, and the factors discussed below,
the Board of Directors of Precious Metals recommends that shareholders of
Precious Metals approve the Interim Sub-Advisory Agreement. Such Agreement
became effective on November 28, 1997. Pursuant to an order from the SEC, all
<PAGE>
fees payable under the Interim Sub-Advisory Agreement will be placed in escrow
and paid to Cavelti Capital if shareholders approve the contract within 120 days
of its effective date. The Interim Sub-Advisory Agreement will remain in effect
until the earlier of the Closing Date for the Reorganization or two years from
its effective date. The terms of the Interim Sub-Advisory Agreement are
essentially the same as the Previous Sub-Advisory Agreement (as defined below).
The only difference between the Previous Sub-Advisory Agreement and the Interim
Sub-Advisory Agreement, if approved by shareholders, is the length of time the
Agreement is in effect. A description of the Interim Sub- Advisory Agreement
pursuant to which Cavelti Capital continues as the investment sub-adviser to
Precious Metals, as well as the services to be provided by Cavelti Capital
pursuant thereto, is set forth below under "Sub-Advisory Services." The
description of the Interim Sub-Advisory Agreement in this Prospectus/Proxy
Statement is qualified in its entirety by reference to the Interim Sub-Advisory
Agreement, attached hereto as Exhibit C.
Cavelti Capital Management, Ltd., 4100 Yonge Street, Willowdale, MP2
2B6 Ontario Canada has served as sub-adviser to Precious Metals since July 12,
1995 pursuant to a Sub-Advisory Agreement dated July 11, 1995 (the "Previous
Sub-Advisory Agreement") and is responsible for the day-to-day management of
Precious Metals' portfolio. See "Summary - Investment Advisers and Sub-Adviser."
Cavelti Capital is a Canadian money management firm specializing in bullion and
precious metals mining shares. Peter C. Cavelti, the President of Cavelti
Capital, has extensive experience in the field of precious metals. Cavelti
Capital clients include government agencies, financial institutions, mining
companies and Canadian closed-end funds.
The Directors have authorized Precious Metals to enter into the Interim
Sub-Advisory Agreement with Virtus and Cavelti Capital. Such Agreement became
effective on November 28, 1997. If the Interim Sub-Advisory Agreement for
Precious Metals is not approved by shareholders, the Directors will consider
appropriate actions to be taken with respect to Precious Metals' investment
sub-advisory arrangements at that time. The Previous Sub- Advisory Agreement was
last approved by the Directors, including a majority of the Independents
Directors, on May 11, 1997.
Comparison of the Interim Sub-Advisory Agreement and the Previous
Sub-Advisory Agreement
Sub-Advisory Services. The management and advisory services to be provided
by Cavelti Capital under the Interim Sub-Advisory Agreement are identical to
those currently provided by Cavelti Capital under the Previous Sub-Advisory
Agreement. Under the Previous Sub-Advisory Agreement, Cavelti Capital supervised
the
<PAGE>
investment and reinvestment of the cash, securities or other properties
comprising Precious Metals' portfolio, subject at all times to the direction of
Virtus and the policies and control of Precious Metals' Board of Directors.
Fees and Expenses. The investment sub-advisory fees under the Previous
Sub-Advisory Agreement and the Interim Sub-Advisory Agreement are identical. As
compensation for its sub-advisory services under the Previous Sub-Advisory
Agreement Cavelti Capital was paid by Virtus a monthly fee at the annual rate of
0.30% of the first $150 million of the Fund's average daily net assets; plus
0.2625% of the Fund's average daily net assets in excess of $150 million but
less than $150 million; plus 0.325% of the Fund's average daily net assets in
excess of $150 million.
The fee paid to Cavelti Capital by Virtus for the fiscal year ended
September 30, 1997 was $223,285. The fee paid to Cavelti Capital for the period
May 1, 1996 to September 30, 1996 was $269,873. The fee paid to Cavelti Capital
by Virtus for the period from July 12, 1995 through April 30, 1996 was $228,140.
The name and address of the principal executive officers and directors
of Cavelti Capital are set forth in Appendix B to this Prospectus/Proxy
Statement.
Limitation of Liability. The Previous Sub-Advisory Agreement provided
that in the absence of willful misfeasance, bad faith or gross negligence on the
part of Cavelti Capital or its officers, directors, or employees or reckless
disregard by Cavelti Capital of its duties under the Agreement, Cavelti Capital
shall not be liable to Virtus, Precious Metals or to any shareholder of Precious
Metals for any act or omission in the course of, or connected with, rendering
services thereunder or for any losses that may sustained in the purchase,
holding or sale of any security. The Interim Sub-Advisory Agreement contains an
identical provision.
Termination; Assignment. The Interim Sub-Advisory Agreement provides
that it may be terminated without penalty by vote of a majority of the
outstanding voting securities of Precious Metals (as defined in the 1940 Act) or
by a vote of a majority of Precious Metals' entire Board of Directors on 60
days' written notice to Cavelti Capital or by Virtus or Cavelti Capital on 60
days' written notice to the other party to the Agreement. Also, the Interim
Sub-Advisory Agreement will automatically terminate in the event of its
assignment (as defined in the 1940 Act). The Previous Sub-Advisory Agreement
contained identical provisions as to termination and assignment.
<PAGE>
The Board of Directors considered the Interim Sub-Advisory Agreement as
part of its overall approval of the Plan. The Board of Directors considered,
among other things, the factors set forth above in "Reasons for the
Reorganization." The Board of Directors also considered the fact that there were
no material differences between the terms of the Interim Sub-Advisory Agreement
and the terms of the Previous Sub-Advisory Agreement.
THE DIRECTORS OF PRECIOUS METALS RECOMMEND
THAT SHAREHOLDERS APPROVE THE
INTERIM SUB-ADVISORY AGREEMENT.
ADDITIONAL INFORMATION
Evergreen Precious Metals. Information concerning the operation and
management of Evergreen Precious Metals is incorporated herein by reference from
the Prospectus dated April 30, 1997, as supplemented, a copy of which is
enclosed, and Statement of Additional Information dated April 30, 1997. A copy
of such Statement of Additional Information is available upon request and
without charge by writing to Evergreen Precious Metals at the address listed on
the cover page of this Prospectus/Proxy Statement or by calling toll-free
1-800-343- 2898.
Precious Metals. Information about the Fund is included in its current
Prospectus dated August 31, 1997 and in the Statement of Additional Information
of the same date, that has been filed with the SEC, all of which are
incorporated herein by reference. Copies of the Prospectus and Statement of
Additional Information are available upon request and without charge by writing
to Precious Metals at the address listed on the cover page of this
Prospectus/Proxy Statement or by calling toll-free 1-800-829- 3863.
Evergreen Precious Metals and Precious Metals are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance therewith file reports and other information, including
proxy material, and charter documents with the SEC. These items can be inspected
and copies obtained at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices located at Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661- 2511 and Seven World Trade Center, Suite 1300, New York, New
York 10048.
VOTING INFORMATION CONCERNING THE MEETING
<PAGE>
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Directors of Precious Metals to be used at the
Special Meeting of Shareholders to be held at 2:00 p.m., February 20, 1998, at
the offices of the Evergreen Funds, 200 Berkeley Street, Boston, Massachusetts
02116 and at any adjournments thereof. This Prospectus/Proxy Statement, along
with a Notice of the meeting and a proxy card, is first being mailed to
shareholders of Precious Metals on or about January 5, 1998. Only shareholders
of record as of the close of business on the Record Date will be entitled to
notice of, and to vote at, the Meeting or any adjournment thereof. The holders
of a majority of the outstanding shares entitled to vote, at the close of
business on the Record Date, present in person or represented by proxy, will
constitute a quorum for the Meeting. If the enclosed form of proxy is properly
executed and returned in time to be voted at the Meeting, the proxies named
therein will vote the shares represented by the proxy in accordance with the
instructions marked thereon. Unmarked proxies will be voted FOR the proposed
Reorganization, FOR the Interim Advisory Agreement, FOR the Interim Sub-Advisory
Agreement and FOR any other matters deemed appropriate. Proxies that reflect
abstentions and "broker non-votes" (i.e., shares held by brokers or nominees as
to which (i) instructions have not been received from the beneficial owners or
the persons entitled to vote or (ii) the broker or nominee does not have
discretionary voting power on a particular matter) will be counted as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum, but will not be counted as shares voted and will have no effect on
the vote regarding the Plan. However, such "broker non-votes" will have the
effect of being counted as votes against the Interim Advisory Agreement and the
Interim Sub- Advisory Agreement which must be approved by a percentage of the
shares present at the Meeting or a majority of the outstanding votes securities.
A proxy may be revoked at any time on or before the Meeting by written notice to
the Secretary of Precious Metals, Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. Unless revoked, all valid proxies will be voted in
accordance with the specifications thereon or, in the absence of such
specifications, FOR approval of the Plan and the Reorganization contemplated
thereby, FOR approval of the Interim Advisory Agreement and FOR approval of the
Interim Sub-Advisory Agreement.
Approval of the Plan will require the affirmative vote of a majority of
the shares voted and entitled to vote at the Meeting at which a quorum of the
Fund's shares is present. Approval of the Interim Advisory Agreement and Interim
Sub-Advisory Agreement will require the affirmative vote of (i) 67% or more of
the outstanding voting securities if holders of more than 50% of the outstanding
voting securities are present, in person or by proxy,
<PAGE>
at the Meeting, or (ii) more than 50% of the outstanding voting securities,
whichever is less. Each full share outstanding is entitled to one vote and each
fractional share outstanding is entitled to a proportionate share of one vote.
Proxy solicitations will be made primarily by mail, but proxy
solicitations may also be made by telephone, telegraph or personal solicitations
conducted by officers and employees of Keystone or Signet, their affiliates or
other representatives of Precious Metals (who will not be paid for their
soliciting activities). Shareholder Communications Corporation has been engaged
by Precious Metals to assist in soliciting proxies.
If you wish to participate in the Meeting, you may submit the proxy
card included with this Prospectus/Proxy Statement or attend in person. Any
proxy given by you is revocable.
In the event that sufficient votes to approve the Reorganization are
not received by February 20, 1998, the persons named as proxies may propose one
or more adjournments of the Meeting to permit further solicitation of proxies.
In determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
Any such adjournment will require an affirmative vote by the holders of a
majority of the shares present in person or by proxy and entitled to vote at the
Meeting. The persons named as proxies will vote upon such adjournment after
consideration of all circumstances which may bear upon a decision to adjourn the
Meeting.
A shareholder who objects to the proposed Reorganization will not be
entitled under either Maryland law or the Articles of Incorporation of Precious
Metals to demand payment for, or an appraisal of, his or her shares. However,
shareholders should be aware that the Reorganization as proposed is not expected
to result in recognition of gain or loss to shareholders for federal income tax
purposes and that, if the Reorganization is consummated, shareholders will be
free to redeem the shares of Evergreen Precious Metals which they receive in the
transaction at their then-current net asset value. Shares of Precious Metals may
be redeemed at any time prior to the consummation of the Reorganization.
Shareholders of Precious Metals may wish to consult their tax advisers as to any
differing consequences of redeeming Fund shares prior to the Reorganization or
exchanging such shares in the Reorganization.
<PAGE>
Precious Metals does not hold annual shareholder meetings. If the
Reorganization is not approved, shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for a subsequent shareholder
meeting should send their written proposals to the Secretary of Precious Metals
at the address set forth on the cover of this Prospectus/Proxy Statement such
that they will be received by the Fund in a reasonable period of time prior to
any such meeting.
The votes of the shareholders of Evergreen Precious Metals are not
being solicited by this Prospectus/Proxy Statement and are not required to carry
out the Reorganization.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES.
Please advise Precious Metals whether other persons are beneficial owners of
shares for which proxies are being solicited and, if so, the number of copies of
this Prospectus/Proxy Statement needed to supply copies to the beneficial owners
of the respective shares.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of Evergreen Precious Metals as of October 31,
1997, and the financial statements and financial highlights for the periods
indicated therein, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The financial statements and financial highlights of Precious Metals
incorporated in this Prospectus/Proxy Statement by reference from the Annual
Report of Precious Metals for the year ended September 30, 1997 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Evergreen
Precious Metals will be passed upon by Sullivan & Worcester LLP, Washington,
D.C.
OTHER BUSINESS
The Directors of Precious Metals do not intend to present
any other business at the Meeting. If, however, any other
<PAGE>
matters are properly brought before the Meeting, the persons named in the
accompanying form of proxy will vote thereon in accordance with their judgment.
THE DIRECTORS OF PRECIOUS METALS RECOMMEND APPROVAL OF THE PLAN, THE
INTERIM ADVISORY AGREEMENT AND THE INTERIM SUB-ADVISORY AGREEMENT, AND ANY
UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR OF
APPROVAL OF THE PLAN, THE INTERIM ADVISORY AGREEMENT AND THE INTERIM
SUB-ADVISORY AGREEMENT.
January 5, 1998
<PAGE>
APPENDIX A
The names and addresses of the principal executive officers
and directors of Virtus Capital Management, Inc. are as follows:
OFFICERS:
Name Address
- ---- -------
Tanya Orr Bird Virtus Capital Management, Inc.
707 East Main Street
Suite 1300
Richmond, Virginia 23219
Josie Clemons Rosson Virtus Capital Management, Inc.
707 East Main Street
Suite 1300
Richmond, Virginia 23219
DIRECTORS:
Name Address
- ---- -------
Tanya Orr Bird Virtus Capital Management, Inc.
707 East Main Street
Suite 1300
Richmond, Virginia 23219
<PAGE>
APPENDIX B
The names and addresses of the principal executive officers
and directors of Cavelti Capital Management, Ltd. are as follows:
OFFICERS:
Name Address
- ---- -------
Peter C. Cavelti Cavelti Capital Management, Ltd.
4100 Yonge Street
Willowdale, Ontario M2P 2B6
Canada
Heinz Thoma Cavelti Capital Management, Ltd.
4100 Yonge Street
Willowdale, Ontario M2P 2B6
Canada
Carolyn Cavelti Cavelti Capital Management, Ltd.
4100 Yonge Street
Willowdale, Ontario M2P 2B6
Canada
DIRECTORS:
Name Address
- ---- -------
Peter C. Cavelti Cavelti Capital Management, Ltd.
4100 Yonge Street
Willowdale, Ontario M2P 2B6
Canada
Heinz Thoma Cavelti Capital Management, Ltd.
4100 Yonge Street
Willowdale, Ontario M2P 2B6
Canada
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 26th day of November, 1997, by and between the Evergreen International
Trust, a Delaware business trust, with its principal place of business at 200
Berkeley Street, Boston, Massachusetts 02116 (the "Trust"), with respect to the
Evergreen Precious Metals Fund series (the "Acquiring Fund"), and Blanchard
Precious Metals Fund, Inc., a Maryland corporation, with its principal place of
business at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779,(the
"Selling Fund").
This Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of (i) the transfer of all of
the assets of the Selling Fund in exchange solely for Class A shares of
beneficial interest, $.001 par value per share, of the Acquiring Fund (the
"Acquiring Fund Shares"); (ii) the assumption by the Acquiring Fund of certain
identified liabilities of the Selling Fund; and (iii) the distribution, after
the Closing Date hereinafter referred to, of the Acquiring Fund Shares to the
shareholders of the Selling Fund in liquidation of the Selling Fund as provided
herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Selling Fund is an open-end, registered investment company
of the management type, and the Acquiring Fund is a separate investment series
of an open-end, registered investment company of the management type and the
Selling Fund owns securities that generally are assets of the character in which
the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of
beneficial interest;
WHEREAS, the Trustees of the Trust have determined that the exchange of
all of the assets of the Selling Fund for Acquiring Fund Shares and the
assumption of certain identified liabilities of the Selling Fund by the
Acquiring Fund on the terms and conditions hereinafter set forth are in the best
interests of the Acquiring Fund's shareholders;
WHEREAS, the Board of Directors of the Selling Fund has determined that
the Selling Fund should exchange all of its assets and certain identified
liabilities for Acquiring Fund Shares and that the interests of the existing
shareholders of the
<PAGE>
Selling Fund will not be diluted as a result of the transactions
contemplated herein;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR
THE ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND
LIABILITIES AND LIQUIDATION OF THE SELLING FUND
1.1 THE EXCHANGE. Subject to the terms and conditions herein set forth
and on the basis of the representations and warranties contained herein, the
Selling Fund agrees to transfer all of the Selling Fund's assets as set forth in
paragraph 1.2 to the Acquiring Fund. The Acquiring Fund agrees in exchange
therefor (i) to deliver to the Selling Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of each such class of the Selling Fund by the net
asset value per share of the corresponding class of Acquiring Fund Shares
computed in the manner and as of the time and date set forth in paragraph 2.2;
and (ii) to assume certain identified liabilities of the Selling Fund, as set
forth in paragraph 1.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 (the "Closing Date").
1.2 ASSETS TO BE ACQUIRED. The assets of the Selling Fund to be
acquired by the Acquiring Fund shall consist of all property, including, without
limitation, all cash, securities, commodities, and interests in futures and
dividends or interest receivables, that is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books of the Selling Fund
on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of Selling Fund's
assets as of the date thereof. The Selling Fund hereby represents that as of the
date of the execution of this Agreement there have been no changes in its
financial position as reflected in said financial statements other than those
occurring in the ordinary course of its business in connection with the purchase
and sale of securities and the payment of its normal operating expenses.
The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a list of the
<PAGE>
securities, if any, on the Selling Fund's list referred to in the second
sentence of this paragraph that do not conform to the Acquiring Fund's
investment objectives, policies, and restrictions. The Selling Fund will, within
a reasonable time prior to the Closing Date, furnish the Acquiring Fund with a
list of its portfolio securities and other investments. In the event that the
Selling Fund holds any investments that the Acquiring Fund may not hold, the
Selling Fund, if requested by the Acquiring Fund, will dispose of such
securities prior to the Closing Date. In addition, if it is determined that the
Selling Fund and the Acquiring Fund portfolios, when aggregated, would contain
investments exceeding certain percentage limitations imposed upon the Acquiring
Fund with respect to such investments, the Selling Fund if requested by the
Acquiring Fund will dispose of a sufficient amount of such investments as may be
necessary to avoid violating such limitations as of the Closing Date.
Notwithstanding the foregoing, nothing herein shall require the Selling Fund to
dispose of any investments or securities if, in the reasonable judgment of the
Selling Fund, such disposition would adversely affect the tax-free nature of the
Reorganization or would violate the Selling Fund's fiduciary duty to its
shareholders.
1.3 LIABILITIES TO BE ASSUMED. The Selling Fund will endeavor to
discharge all of its known liabilities and obligations prior to the Closing
Date. The Acquiring Fund shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and Liabilities of the
Selling Fund prepared on behalf of the Selling Fund, as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall assume only those liabilities of the Selling Fund reflected in such
Statement of Assets and Liabilities and shall not assume any other liabilities,
whether absolute or contingent, known or unknown, accrued or unaccrued, all of
which shall remain the obligation of the Selling Fund.
In addition, upon completion of the Reorganization, for purposes of
calculating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by the Acquiring Fund under the National
Association of Securities Dealers, Inc. Conduct Rule 2830 ("Aggregate NASD
Cap"), the Acquiring Fund will add to its Aggregate NASD Cap immediately prior
to the Reorganization the Aggregate NASD Cap of the Selling Fund immediately
prior to the Reorganization, in each case calculated in accordance with such
Rule 2830.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after
the Closing Date as is conveniently practicable (the
<PAGE>
"Liquidation Date"), (a) the Selling Fund will liquidate and distribute pro rata
to the Selling Fund's shareholders of record, determined as of the close of
business on the Valuation Date (the "Selling Fund Shareholders"), the Acquiring
Fund Shares received by the Selling Fund pursuant to paragraph 1.1; and (b) the
Selling Fund will thereupon proceed to dissolve as set forth in paragraph 1.8
below. Such liquidation and distribution will be accomplished by the transfer of
the Acquiring Fund Shares then credited to the account of the Selling Fund on
the books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Selling Fund Shareholders and representing
the respective pro rata number of the Acquiring Fund Shares due such
shareholders. All issued and outstanding shares of the Selling Fund will
simultaneously be canceled on the books of the Selling Fund. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Shares of the
Acquiring Fund will be issued in the manner described in the combined Prospectus
and Proxy Statement on Form N-14 to be distributed to shareholders of the
Selling Fund as described in paragraph 5.7.
1.6 TRANSFER TAXES. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the Selling
Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the
Selling Fund is and shall remain the responsibility of the Selling Fund up to
and including the Closing Date and such later date on which the Selling Fund is
terminated.
1.8 TERMINATION. The Selling Fund shall be terminated promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on
<PAGE>
the New York Stock Exchange on the business day next preceding the Closing Date
(such time and date being hereinafter called the "Valuation Date"), using the
valuation procedures set forth in the Trust's Declaration of Trust and the
Acquiring Fund's then current prospectuses and statement of additional
information or such other valuation procedures as shall be mutually agreed upon
by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of the Acquiring
Fund Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Trust's Declaration of Trust and the
Acquiring Fund's then current prospectuses and statement of additional
information.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares of
each class to be issued (including fractional shares, if any) in exchange for
the Selling Fund's assets shall be determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of the Selling Fund attributable to each of its
classes by the net asset value per share of the respective classes of the
Acquiring Fund determined in accordance with paragraph 2.2. Holders of shares of
the Selling Fund will receive Class A shares of the Acquiring Fund.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
State Street Bank and Trust Company in accordance with its regular practice in
pricing the shares and assets of the Acquiring Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The Closing (the "Closing") shall take place on or
about February 27, 1998 or such other date as the parties may agree to in
writing (the "Closing Date"). All acts taking place at the Closing shall be
deemed to take place simultaneously immediately prior to the opening of business
on the Closing Date unless otherwise provided. The Closing shall be held as of
9:00 a.m. at the offices of the Evergreen Funds, 200 Berkeley Street, Boston, MA
02116, or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. Signet Trust Company, as custodian for the
Selling Fund (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that (a) the Selling Fund's portfolio securities,
cash, and any
<PAGE>
other assets shall have been delivered in proper form to the Acquiring Fund on
the Closing Date; and (b) all necessary taxes including all applicable federal
and state stock transfer stamps, if any, shall have been paid, or provision for
payment shall have been made, in conjunction with the delivery of portfolio
securities by the Selling Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation
Date (a) the New York Stock Exchange or another primary trading market for
portfolio securities of the Acquiring Fund or the Selling Fund shall be closed
to trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Selling Fund is impracticable, the Valuation Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4 TRANSFER AGENT'S CERTIFICATE. Evergreen Service Company, as
transfer agent for the Selling Fund as of the Closing Date shall deliver at the
Closing a certificate of an authorized officer stating that its records contain
the names and addresses of the Selling Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver or
cause Evergreen Service Company, its transfer agent as of the Closing Date, to
issue and deliver a confirmation evidencing the Acquiring Fund Shares to be
credited on the Closing Date to the Secretary of Blanchard Funds or provide
evidence satisfactory to the Selling Fund that such Acquiring Fund Shares have
been credited to the Selling Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, share certificates, if any, receipts and other documents as
such other party or its counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE SELLING FUND. The Selling Fund
represents and warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a Maryland Corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland.
<PAGE>
(b) The Selling Fund is a Maryland Corporation that is
registered as an investment company classified as a management company of the
open-end type, and its registration with the Securities and Exchange Commission
(the "Commission") as an investment company under the Investment Company Act of
1940, as amended (the "1940 Act"), is in full force and effect.
(c) The current prospectuses and statement of additional
information of the Selling Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) The Selling Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not result,
in violation of any provision of its Articles of Incorporation or By-Laws or of
any material agreement, indenture, instrument, contract, lease, or other
undertaking to which the Selling Fund is a party or by which it is bound.
(e) The Selling Fund has no material contracts or other
commitments (other than this Agreement) that will be terminated with liability
to it prior to the Closing Date, except for liabilities, if any, to be
discharged or reflected on the Statement of Assets and Liabilities as provided
in paragraph 1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted
by the Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Selling Fund or any of its properties
or assets, which, if adversely determined, would materially and adversely affect
its financial condition, the conduct of its business, or the ability of the
Selling Fund to carry out the transactions contemplated by this Agreement. The
Selling Fund knows of no facts that might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
(g) The financial statements of the Selling Fund at
September 30, 1997 are in accordance with generally accepted
<PAGE>
accounting principles consistently applied, and such statements (copies of which
have been furnished to the Acquiring Fund) fairly reflect the financial
condition of the Selling Fund as of such date, and there are no known contingent
liabilities of the Selling Fund as of such date not disclosed therein.
(h) Since September 30, 1997 there has not been any material
adverse change in the Selling Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Selling Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquiring Fund. For the purposes of this subparagraph (h), a
decline in the net asset value of the Selling Fund shall not constitute a
material adverse change.
(i) At the Closing Date, all federal and other tax returns and
reports of the Selling Fund required by law to have been filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid, or provision shall have been made for the
payment thereof. To the best of the Selling Fund's knowledge, no such return is
currently under audit, and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, the Selling Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains.
(k) All issued and outstanding shares of the Selling Fund are,
and at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Selling Fund. All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.4. The Selling Fund does not have outstanding any
options, warrants, or other rights to subscribe for or purchase any of the
Selling Fund shares, nor is there outstanding any security convertible into any
of the Selling Fund shares.
(l) At the Closing Date, the Selling Fund will have good and
marketable title to the Selling Fund's assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.2 and full right, power, and authority to sell,
assign, transfer, and deliver such assets hereunder, and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer
<PAGE>
thereof, including such restrictions as might arise under the 1933 Act, other
than as disclosed to the Acquiring Fund and accepted by the Acquiring Fund.
(m) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Selling
Fund and, subject to approval by the Selling Fund Shareholders, this Agreement
constitutes a valid and binding obligation of the Selling Fund, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights and to general equity principles.
(n) The information to be furnished by the Selling Fund for
use in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable thereto.
(o) The Proxy Statement of the Selling Fund to be included in
the Registration Statement (as defined in paragraph 5.7)(other than information
therein that relates to the Acquiring Fund) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
4.2.1 REPRESENTATIONS OF THE ACQUIRING FUND. The
Acquiring Fund represents and warrants to the Selling Fund as
follows:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust that is registered as an investment company classified
as a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect.
(c) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the
<PAGE>
1940 Act and the rules and regulations of the Commission thereunder and do not
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring Fund is
a party or by which it is bound.
(e) Except as otherwise disclosed in writing to the Selling
Fund and accepted by the Selling Fund, no litigation, administrative proceeding
or investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect its financial condition and the conduct of its business or the
ability of the Acquiring Fund to carry out the transactions contemplated by this
Agreement. The Acquiring Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental body
that materially and adversely affects its business or its ability to consummate
the transactions contemplated herein.
(f) The financial statements of the Acquiring Fund at February
28, 1997 are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been furnished
to the Selling Fund) fairly reflect the financial condition of the Acquiring
Fund as of such date, and there are no known contingent liabilities of the
Acquiring Fund as of such date not disclosed therein.
(g) Since February 28, 1997, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Selling Fund. For the purposes of this subparagraph (g), a
decline in the net asset value of the Acquiring Fund shall not constitute a
material adverse change.
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed by such dates
shall have been filed, and all federal
<PAGE>
and other taxes shown due on said returns and reports shall have been paid or
provision shall have been made for the payment thereof. To the best of the
Acquiring Fund's knowledge, no such return is currently under audit, and no
assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains.
(j) All issued and outstanding Acquiring Fund Shares are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. The Acquiring Fund does not have outstanding any options,
warrants, or other rights to subscribe for or purchase any Acquiring Fund
Shares, nor is there outstanding any security convertible into any Acquiring
Fund Shares.
(k) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights and to general equity
principles.
(l) The Acquiring Fund Shares to be issued and delivered to
the Selling Fund, for the account of the Selling Fund Shareholders, pursuant to
the terms of this Agreement will, at the Closing Date, have been duly authorized
and, when so issued and delivered, will be duly and validly issued Acquiring
Fund Shares, and will be fully paid and non-assessable.
(m) The information to be furnished by the Acquiring Fund for
use in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto.
(n) The Prospectus and Proxy Statement (as defined in
paragraph 5.7) to be included in the Registration Statement (only insofar as it
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit
<PAGE>
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(o) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act,
and such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
4.2.2 REPRESENTATIONS OF PREDECESSOR FUND. The representations and
warranties set forth in Section 4.2.1 shall be deemed to include, to the extent
applicable, representations and warranties made by and on behalf of Keystone
Precious Metals Holdings, Inc. (the "Predecessor Fund"), a Delaware corporation,
as of the date hereof. The Acquiring Fund shall deliver to the Selling Fund a
certificate of the Predecessor Fund of even date making the representations set
forth in Section 4.2.1 with respect to the Predecessor Fund to the extent
applicable to the Predecessor Fund as of the date hereof.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Selling
Fund each will operate its business in the ordinary course between the date
hereof and the Closing Date, it being understood that such ordinary course of
business will include customary dividends and distributions.
5.2 APPROVAL OF SHAREHOLDERS. The Selling Fund will call a meeting of
the Selling Fund Shareholders to consider and act upon this Agreement and to
take all other action necessary to obtain approval of the transactions
contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Selling Fund covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Selling Fund will assist the Acquiring
Fund in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Selling Fund shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Selling Fund will each
<PAGE>
take, or cause to be taken, all action, and do or cause to be done, all things
reasonably necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, including any actions required to
be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but
in any case within sixty days after the Closing Date, the Selling Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Selling Fund for
federal income tax purposes that will be carried over by the Acquiring Fund as a
result of Section 381 of the Code, and which will be reviewed by KPMG Peat
Marwick LLP and certified by Blanchard Funds' President and Treasurer.
5.7 PREPARATION OF FORM N-14 REGISTRATION STATEMENT. The Selling Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus, which will include the proxy statement, referred to
in paragraph 4.1(o) (the "Prospectus and Proxy Statement"), all to be included
in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act in
connection with the meeting of the Selling Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.8 CAPITAL LOSS CARRYFORWARDS. As promptly as practicable, but in any
case within sixty days after the Closing Date, the Acquiring Fund and the
Selling Fund shall cause KPMG Peat Marwick LLP to issue a letter addressed to
the Acquiring Fund and the Selling Fund, in form and substance satisfactory to
the Funds, setting forth the federal income tax implications relating to capital
loss carryforwards (if any) of the Selling Fund and the related impact, if any,
of the proposed transfer of all of the assets of the Selling Fund to the
Acquiring Fund and the ultimate dissolution of the Selling Fund, upon the
shareholders of the Selling Fund.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
<PAGE>
6.1 All representations, covenants, and warranties of the Acquiring
Fund contained in this Agreement shall be true and correct as of the date hereof
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by the Trust's President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Selling Fund and dated as of the Closing Date, to
such effect and as to such other matters as the Selling Fund shall reasonably
request.
6.2 The Selling Fund shall have received on the Closing Date an opinion
from Sullivan & Worcester LLP, counsel to the Acquiring Fund, dated as of the
Closing Date, in a form reasonably satisfactory to the Selling Fund, covering
the following points:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed, and
delivered by the Acquiring Fund, and, assuming due authorization, execution and
delivery of this Agreement by the Selling Fund, is a valid and binding
obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) Assuming that a consideration therefor not less than the
net asset value thereof has been paid, the Acquiring Fund Shares to be issued
and delivered to the Selling Fund on behalf of the Selling Fund Shareholders as
provided by this Agreement are duly authorized and upon such delivery will be
legally issued and outstanding and fully paid and non-assessable. No shareholder
of the Acquiring Fund has any preemptive rights in respect thereof.
(e) The Registration Statement, to such counsel's
knowledge, has been declared effective by the Commission and no
<PAGE>
stop order under the 1933 Act pertaining thereto has been issued, and to the
knowledge of such counsel, no consent, approval, authorization or order of any
court or governmental authority of the United States or the State of Delaware is
required for consummation by the Acquiring Fund of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934 Act and
the 1940 Act, and as may be required under state securities laws.
(f) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Acquiring Fund is
a party or by which it is bound.
(g) Only insofar as they relate to the Acquiring Fund, the
descriptions in the Prospectus and Proxy Statement of statutes, legal and
governmental proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown.
(h) Such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.
(i) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Acquiring Fund or
any of its properties or assets and the Acquiring Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business, other
than as previously disclosed in the Registration Statement.
Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Acquiring Fund at
which the contents of the Prospectus and Proxy Statement and related matters
were discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in
<PAGE>
the Prospectus and Proxy Statement (except to the extent indicated in paragraph
(g) of their above opinion), on the basis of the foregoing (relying as to
materiality to a large extent upon the opinions of the Trust's officers and
other representatives of the Acquiring Fund), no facts have come to their
attention that lead them to believe that the Prospectus and Proxy Statement as
of its date, as of the date of the Selling Fund Shareholders' meeting, and as of
the Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding the Acquiring Fund
or necessary, in the light of the circumstances under which they were made, to
make the statements therein regarding the Acquiring Fund not misleading. Such
opinion may state that such counsel does not express any opinion or belief as to
the financial statements or any financial or statistical data, or as to the
information relating to the Selling Fund, contained in the Prospectus and Proxy
Statement or the Registration Statement, and that such opinion is solely for the
benefit of Blanchard Funds and the Selling Fund. Such opinion shall contain such
other assumptions and limitations as shall be in the opinion of Sullivan &
Worcester LLP appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to Prospectus and Proxy Statement
include and relate to only the text of such Prospectus and Proxy Statement and
not to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
6.3 The merger between First Union Corporation and Signet Banking
Corporation shall be completed prior to the Closing Date.
6.4 The acquisition of the assets of the Predecessor Fund by the
Acquiring Fund shall have been completed prior to the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Selling Fund of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
7.1 All representations, covenants, and warranties of the Selling Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date, and the Selling Fund shall have delivered to the Acquiring
Fund
<PAGE>
on the Closing Date a certificate executed in its name by the Selling Fund's
President or Vice President and the Treasurer or Assistant Treasurer, in form
and substance satisfactory to the Acquiring Fund and dated as of the Closing
Date, to such effect and as to such other matters as the Acquiring Fund shall
reasonably request.
7.2 The Selling Fund shall have delivered to the Acquiring Fund a
statement of the Selling Fund's assets and liabilities, together with a list of
the Selling Fund's portfolio securities showing the tax costs of such securities
by lot and the holding periods of such securities, as of the Closing Date,
certified by the Treasurer of Blanchard Funds.
7.3.1 The Acquiring Fund shall have received on the Closing Date an
opinion of Dickstein Shapiro Morin & Oshinsky LLP, counsel to the Selling Fund,
in a form satisfactory to the Acquiring Fund covering the following points:
(a) The Selling Fund is a Maryland corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and has the power to own all of its properties and assets and to carry on its
business as presently conducted.
(b) The Selling Fund is a separate investment series of a
Maryland corporation registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed and
delivered by the Selling Fund, and, assuming due authorization, execution, and
delivery of this Agreement by the Acquiring Fund, is a valid and binding
obligation of the Selling Fund enforceable against the Selling Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the State of Maryland is required for consummation by the Selling Fund
of the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act, and as may be required under state
securities laws.
<PAGE>
(e) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Selling Fund's Articles of Incorporation or By-laws, or any
provision of any material agreement, indenture, instrument, contract, lease or
other undertaking (in each case known to such counsel) to which the Selling Fund
is a party or by which it or any of its properties may be bound or, to the
knowledge of such counsel, result in the acceleration of any obligation or the
imposition of any penalty, under any agreement, judgment, or decree to which the
Selling Fund is a party or by which it is bound.
(f) The descriptions in the Prospectus and Proxy Statement of
this Agreement, as set forth under the caption "Reasons for the Reorganization -
Agreement and Plan of Reorganization," the Interim Advisory Agreement and the
Previous Advisory Agreement, as set forth under the caption "Information
Regarding the Interim Advisory Agreement," the Interim Sub- Advisory Agreement
and the Previous Sub-Advisory Agreement, as set forth under the caption
"Information Regarding the Interim Sub-Advisory Agreement" and the description
of voting requirements applicable to approval of the Interim Advisory Agreement
and Interim Sub-Advisory Agreement, as set forth under the caption "Voting
Information Concerning the Meeting," insofar as the latter constitutes a summary
of applicable voting requirements under the Investment Company Act of 1940, as
amended, are, in each case, accurate and fairly present the information required
to be shown by the applicable requirements of Form N-14.
(g) Such counsel does not know of any legal or governmental
proceedings, insofar as they relate to the Selling Fund existing on or before
the date of mailing of the Prospectus and Proxy Statement and the Closing Date,
required to be described in the Prospectus and Proxy Statement or to be filed as
an exhibit to the Registration Statement which are not described or filed as
required.
(h) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Selling Fund or
any of its respective properties or assets and the Selling Fund is neither a
party to nor subject to the provisions of any order, decree or judgment of any
court or governmental body, which materially and adversely affects its business
other than as previously disclosed in the Prospectus and Proxy Statement.
7.3.2 The Acquiring Fund shall have received on the closing
Date an opinion of C. Grant Anderson, Esq., Assistant Secretary
<PAGE>
of the Selling Fund, in form satisfactory to the Acquiring Fund as follows:
Assuming that a consideration therefor of not less than the net asset value
thereof has been paid, and assuming that such shares were issued in accordance
with the terms of the Selling Fund's registration statement, or any amendment
thereto, in effect at the time of such issuance, all issued and outstanding
shares of the Selling Fund are legally issued and fully paid and non-assessable.
Mr. Anderson shall also state that he has reviewed and is familiar with
the contents of the Prospectus and Proxy Statement and, although he is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Prospectus and Proxy
Statement on the basis of the foregoing, no facts have come to his attention
that lead him to believe that the Prospectus and Proxy Statement as of its date,
as of the date of the Selling Fund Shareholders' meeting, and as of the Closing
Date, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein regarding the Selling Fund or
necessary, in the light of the circumstances under which they were made, to make
the statements therein regarding the Selling Fund not misleading. Such opinion
may state that he does not express any opinion or belief as to the financial
statements or any financial or statistical data, or as to the information
relating to the Acquiring Fund, contained in the Prospectus and Proxy Statement
or Registration Statement.
The opinions set forth in paragraphs 7.3.1 and 7.3.2 may state that
such opinions are solely for the benefit of the Acquiring Fund. Such opinions
shall contain such other assumptions and limitations as shall be in the opinion
of Dickstein Shapiro Morin & Oshinsky LLP and C. Grant Anderson, as applicable,
appropriate to render the opinions expressed therein, and shall indicate, with
respect to matters of Maryland law, that as Dickstein Shapiro Morin & Oshinsky
LLP and C. Grant Anderson are not admitted to the bar of Maryland, such opinions
are based either upon the review of published statutes, cases and rules and
regulations of the State of Maryland or upon an opinion of Maryland counsel.
In this paragraph 7.3, references to Prospectus and Proxy Statement
include and relate to only the text of such Prospectus and Proxy Statement and
not to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
7.4 The merger between First Union Corporation and Signet Banking
Corporation shall be completed prior to the Closing Date.
<PAGE>
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE SELLING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Selling Fund in accordance with the provisions of the Selling Fund's
Articles of Incorporation and By-Laws and certified copies of the resolutions
evidencing such approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor
the Selling Fund may waive the conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, nor instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act and no action, suit or
other proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein.
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of state Blue Sky securities authorities,
including any necessary "no-action" positions of and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Selling Fund,
provided that either party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
<PAGE>
8.5 The Selling Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the Selling Fund Shareholders all of the Selling Fund's net investment
company taxable income for all taxable periods ending on or prior to the Closing
Date (computed without regard to any deduction for dividends paid) and all of
its net capital gains realized in all taxable periods ending on or prior to the
Closing Date (after reduction for any capital loss carryforward).
8.6 The parties shall have received a favorable opinion of Sullivan &
Worcester LLP, addressed to the Acquiring Fund and the Selling Fund
substantially to the effect that for federal income tax purposes:
(a) The transfer of all of the Selling Fund assets in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of
certain stated liabilities of the Selling Fund followed by the distribution of
the Acquiring Fund Shares to the Selling Fund in dissolution and liquidation of
the Selling Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code and the Acquiring Fund and the Selling Fund
will each be a "party to a reorganization" within the meaning of Section 368(b)
of the Code.
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain stated
liabilities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund
upon the transfer of the Selling Fund assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of
certain stated liabilities of the Selling Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Selling Fund
Shareholders in exchange for their shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund.
(e) The aggregate tax basis for the Acquiring Fund Shares
received by each Selling Fund Shareholder pursuant to the Reorganization will be
the same as the aggregate tax basis of the Selling Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Acquiring Fund Shares to be received by each Selling Fund Shareholder will
include the period during which the Selling Fund shares exchanged
<PAGE>
therefor were held by such shareholder (provided the Selling Fund shares were
held as capital assets on the date of the Reorganization).
(f) The tax basis of the Selling Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the Selling
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Selling Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Selling Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Selling Fund may waive the conditions set forth in this paragraph
8.6.
8.7 The Acquiring Fund shall have received from KPMG Peat Marwick LLP a
letter addressed to the Acquiring Fund, in form and substance satisfactory to
the Acquiring Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Selling Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards) consisting of a reading
of any unaudited pro forma financial statements included in the Registration
Statement and Prospectus and Proxy Statement, and inquiries of appropriate
officials of the Selling Fund responsible for financial and accounting matters,
nothing came to their attention that caused them to believe that such unaudited
pro forma financial statements do not comply as to form in all material respects
with the applicable accounting requirement of the 1933 Act and the published
rules and regulations thereunder;
(c) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the Capitalization Table
appearing in the Registration Statement and Prospectus and Proxy Statement has
been obtained from and is consistent with the accounting records of the Selling
Fund;
(d) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the pro forma financial
statements that are included in the Registration Statement and Prospectus and
Proxy Statement
<PAGE>
were prepared based on the valuation of the Selling Fund's assets in accordance
with the Selling Fund's Articles of Incorporation and the Acquiring Fund's then
current prospectus and statement of additional information pursuant to
procedures customarily utilized by the Acquiring Fund in valuing its own assets;
(e) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the data utilized in the
calculations of the projected expense ratios appearing in the Registration
Statement and Prospectus and Proxy Statement agree with underlying accounting
records of the Selling Fund or with written estimates by Selling Fund's
management and were found to be mathematically correct.
In addition, the Acquiring Fund shall have received from KPMG Peat
Marwick LLP a letter addressed to the Acquiring Fund dated on the Closing Date,
in form and substance satisfactory to the Acquiring Fund, to the effect, that on
the basis of limited procedures agreed upon by the Acquiring Fund (but not an
examination in accordance with generally accepted auditing standards), the
calculation of net asset value per share of the Selling Fund as of the Valuation
Date was determined in accordance with generally accepted accounting practices
and the portfolio valuation practices of the Acquiring Fund.
8.8 The Selling Fund shall have received from KPMG Peat Marwick LLP a
letter addressed to the Selling Fund, in form and substance satisfactory to the
Selling Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards), the Capitalization Table appearing
in the Registration Statement and Prospectus and Proxy Statement has been
obtained from and is consistent with the accounting records of the Acquiring
Fund; and
(c) on the basis of limited procedures agreed upon by the
Selling Fund (but not an examination in accordance with generally accepted
auditing standards), the data utilized in the calculations of the projected
expense ratio appearing in the Registration Statement and Prospectus and Proxy
Statement agree
<PAGE>
with written estimates by each Fund's management and were found to be
mathematically correct.
ARTICLE IX
EXPENSES
9.1 Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Selling Fund and the
Acquiring Fund will be borne by First Union National Bank. Such expenses
include, without limitation, (a) expenses incurred in connection with the
entering into and the carrying out of the provisions of this Agreement; (b)
expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the Acquiring Fund Shares to be issued
pursuant to the provisions of this Agreement; (c) registration or qualification
fees and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund Shares to be
issued in connection herewith in each state in which the Selling Fund
Shareholders are resident as of the date of the mailing of the Prospectus and
Proxy Statement to such shareholders; (d) postage; (e) printing; (f) accounting
fees; (g) legal fees; and (h) solicitation costs of the transaction.
Notwithstanding the foregoing, the Acquiring Fund shall pay its own federal and
state registration fees.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties, and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall not survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or
the Selling Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
<PAGE>
(a) of a breach by the other of any representation, warranty,
or agreement contained herein to be performed at or prior to the Closing Date,
if not cured within 30 days; or
(b) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Selling Fund, the Trust, Blanchard Funds, the respective
Trustees or officers, to the other party or its Trustees or officers.
ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified, or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of the
Selling Fund and the Acquiring Fund; provided, however, that following the
meeting of the Selling Fund Shareholders called by the Selling Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Selling Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflicts
of laws provisions thereof; provided, however, that the due authorization,
execution and delivery of this Agreement, in the case of the Selling Fund, shall
be governed and construed in accordance with the laws of the State of Maryland,
without giving effect to the conflicts of laws provisions thereof.
<PAGE>
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of the Acquiring Fund
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of the Evergreen International Trust personally,
but shall bind only the trust property of the Acquiring Fund, as provided in the
Declaration of Trust of the Trust. The execution and delivery of this Agreement
have been authorized by the Trust on behalf of the Acquiring Fund and signed by
authorized officers of the Trust, acting as such, and neither such authorization
by such Trustees nor such execution and delivery by such officers shall be
deemed to have been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the trust property of the
Acquiring Fund as provided in the Declaration of Trust of the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and sealed this
Agreement, all as of the date first written above.
EVERGREEN INTERNATIONAL TRUST
ON BEHALF OF EVERGREEN
PRECIOUS METALS FUND
By:
Name:
Title:
BLANCHARD PRECIOUS METALS
FUND, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT B
BLANCHARD PRECIOUS METALS FUNDS, INC.
INTERIM MANAGEMENT CONTRACT
This Contract is made this 28th day of November, 1997 between Virtus
Capital Management, Inc., a Maryland corporation having its principal place of
business in Richmond, Virginia (the "Manager"), and Blanchard Precious Metals
Fund, Inc., a Maryland corporation having its principal place of business in
Pittsburgh,
Pennsylvania (the "Corporation").
WHEREAS the Corporation is an open-end management investment company as
that term is defined in the Investment Company Act of 1940, as amended,
and is registered as such with the Securities and Exchange Commission;
and
WHEREAS Manager is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. The Corporation hereby appoints Manager as manager for each of the
portfolios ("Funds") of the Corporation which executes an exhibit to this
Contract, and Manager accepts the appointments. Subject to the direction of the
Directors of the Corporation, Manager shall provide or procure on behalf of each
of the Funds all management and administrative services. In carrying out its
obligations under this paragraph, the Manager shall; (i) provide or arrange for
investment research and supervision of the investments of the Funds; (ii) select
and evaluate the performance of each Fund's Portfolio Sub-Adviser; (iii) select
and evaluate the performance of the Administrator; and (iv) conduct or arrange
for a continuous program of appropriate sale or other disposition and
reinvestment of each Fund's assets.
2. Manager, in its supervision of the investments of each of the Funds,
will be guided by each of the Fund's investment objective and policies and the
provisions and restrictions contained in the Articles of Incorporation and
By-Laws of the Corporation and as set forth in the Registration Statements and
exhibits as may be on file with the Securities and Exchange Commission.
3. Each Fund shall pay or cause to be paid all of its own expenses and
its allocable share of Corporation expenses, including, without limitation, the
expenses of organizing the
<PAGE>
Corporation and continuing its existence; fees and expenses of Directors and
officers of the Corporation; fees for management services and administrative
personnel and services; expenses incurred in the distribution of its shares
("Shares"), including expenses of administrative support services; fees and
expenses of preparing and printing its Registration Statements under the
Securities Act of 1933 and the Investment Company Act of 1940, as amended, and
any amendments thereto; expenses of registering and qualifying the Corporation,
the Funds, and Shares of the Funds under federal and state laws and regulations;
expenses of preparing, printing, and distributing prospectuses (and any
amendments thereto) to shareholders; interest expense, taxes, fees, and
commissions of every kind; expenses of issue (including cost of Share
certificates), purchase, repurchase, and redemption of Shares, including
expenses attributable to a program of periodic issue; charges and expenses of
custodians, transfer agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing and mailing costs, auditing, accounting, and
legal expenses; reports to shareholders and governmental officers and
commissions; expenses of meetings of Directors and shareholders and proxy
solicitations therefor; insurance expenses; association membership dues and such
nonrecurring items as may arise, including all losses and liabilities incurred
in administering the Corporation and the Funds. Each Fund will also pay its
allocable share of such extraordinary expenses as may arise including expenses
incurred in connection with litigation, proceedings, and claims and the legal
obligations of the Corporation to indemnify its officers and Directors and
agents with respect thereto.
4. Each of the Funds shall pay to Manager, for all services rendered to
each Fund by Manager hereunder, the fees set forth in the exhibits attached
hereto.
5. If, for any fiscal year, the total of all ordinary business expenses
of the Fund, including all investment advisory fees but excluding distribution
fees, taxes, interest and extraordinary expenses and certain other excludable
expenses, would exceed the most restrictive expense limits imposed by any
statute or regulatory authority of any jurisdiction in which Shares of the Fund
are offered for sale Manager shall reduce its management fee in order to reduce
such excess expenses, but will not be required to reimburse the Fund for any
ordinary business expenses which exceed the amount of its management fee for
such fiscal year. The amount of any such reduction is to be borne by the Manager
and shall be deducted from the monthly management fee otherwise payable to the
Manager during such fiscal year. For the purposes of this paragraph, the term
"fiscal year" shall exclude the portion of the current fiscal year which shall
have elapsed prior to the date hereof and shall include the portion of
<PAGE>
the then current fiscal year which shall have elapsed at the date of termination
of this Agreement.
6. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
7. The Manager may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses of one
or more of the Funds) to the extent that any Fund's expenses exceed such lower
expense limitation as the Manger may, by notice to the Fund, voluntarily declare
to be effective.
8. This Contract shall begin for each Fund as of the date of execution
of the applicable exhibit and shall continue in effect with respect to each Fund
presently set forth on an exhibit (and any subsequent Funds added pursuant to an
exhibit during the initial term of this Contract) until the earlier of the
Closing Date defined in the Agreement and Plan of Reorganization dated as of
November 26, 1997 with respect to each Fund or for two years from the date of
this Contract set forth above and thereafter for successive periods of one year,
subject to the provisions for termination and all of the other terms and
conditions hereof if: (a) such continuation shall be specifically approved at
least annually by the vote of a majority of the Directors of the Corporation,
including a majority of the Directors who are not parties to this Contract or
interested persons of any such party cast in person at a meeting called for that
purpose; and (b) Manager shall not have notified a Fund in writing at least
sixty (60) days prior to the anniversary date of this Contract in any year
thereafter that it does not desire such continuation with respect to that Fund.
If a Fund is added after the first approval by the Directors as described above,
this Contract will be effective as to that Fund upon execution of the applicable
exhibit and will continue in effect until the next annual approval of the
Contract by the Directors and thereafter for successive periods of one year,
subject to approval as described above.
9. Notwithstanding any provision in this Contract, it may be terminated
at any time with respect to any Fund, without the payment of any penalty, by the
Directors of the Corporation or by a vote of the shareholders of that Fund on
sixty (60) days' written notice to Manager.
10. This Contract may not be assigned by Manager and shall
automatically terminate in the event of any assignment. Manager may employ or
contract with such other person, persons, corporation, or corporations at its
own cost and expense as it
<PAGE>
shall determine in order to assist it in carrying out this
Contract.
11. In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the obligations or duties under this Contract on the
part of Manager, Manager shall not be liable to the Corporation or to any of the
Funds or to any shareholder for any act or omission in the course of or
connected in any way with rendering services or for any losses that may be
sustained in the purchase, holding, or sale of any security.
12. This Contract may be amended at any time by agreement of the
parties provided that the amendment shall be approved both by the vote of a
majority of the Directors of the Corporation, including a majority of the
Directors who are not parties to this Contract or interested persons of any such
party to this Contract (other than as Directors of the Corporation) cast in
person at a meeting called for that purpose, and where required by Section
15(a)(2) of the Act, on behalf of a Fund by a majority of the outstanding voting
securities of such Fund as defined in Section 2(a)(42) of the Act.
13. The Manager acknowledges that all sales literature for investment
companies (such as the Corporation) are subject to strict regulatory oversight.
The Manager agrees to submit any proposed sales literature for the Corporation
(or any Fund) or for itself or its affiliates which mentions the Corporation (or
any Fund) to the Corporation's distributor for review and filing with the
appropriate regulatory authorities prior to the public release of any such sales
literature, provided, however, that nothing herein shall be construed so as to
create any obligation or duty on the part of the Manager to produce sales
literature for the Corporation (or any Fund). The Corporation agrees to cause
its distributor to promptly review all such sales literature to ensure
compliance with relevant requirements, to promptly advise Manager of any
deficiencies contained in such sales literature, to promptly file complying
sales literature with the relevant authorities, and to cause such sales
literature to be distributed to prospective investors in the Corporation.
14. Notice is hereby given that this instrument is executed on behalf
of the Directors of the Corporation as Directors and not individually and that
the obligations of this instrument are not binding upon any of the Directors, or
any of the officers, employees, agents or shareholders of the Corporation
individually but are binding only upon the assets and property of the
Corporation. Notice is also hereby given that the obligations pursuant to this
instrument of a particular Fund and of the Corporation with respect to that
particular Fund shall be limited solely to the assets of that particular Fund.
<PAGE>
15. This Contract shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
16. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
<PAGE>
EXHIBIT A
to the
Management Contract
BLANCHARD PRECIOUS METALS FUND, INC.
For all services rendered by Manager hereunder, the above-named Funds
of the Corporation shall pay to Manager and Manager agrees to accept as full
compensation for all services rendered hereunder, an annual management fee equal
to the following percentage ("the applicable percentage") of the average daily
net assets of each Fund
Name of Fund Percentage of Net Assets
Blanchard Precious 1% of the first $150 million
Metals Fund, Inc. of average daily net assets,
.875% of the Fund's
average daily net
assets in excess of
$150 million but not
exceeding $300
million and .75% of
the Fund's average
daily net assets in
excess of $300
million.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of the applicable percentage
applied to the daily net assets of the Fund.
The management fee so accrued shall be paid to Manager daily.
<PAGE>
Witness the due execution hereof this 28th day of November, 1997.
Attest: Virtus Capital Management, Inc.
________________________ By: ___________________________
Assistant Secretary Senior Vice President
Attest: Blanchard Precious Metals Fund, Inc.
________________________ By: ____________________________
Assistant Secretary Vice President
<PAGE>
EXHIBIT C
INTERIM SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made this 28th day of November, 1997 by and between
VIRTUS CAPITAL MANAGEMENT, INC., a Maryland corporation (the "Manager"), and
CAVELTI CAPITAL MANAGEMENT, a Canadian money management firm (the "Portfolio
Manager" or "Cavelti") with respect to the following recital of fact:
R E C I T A L
WHEREAS, Blanchard Precious Metals Fund, Inc. (the "Corporation") is
registered as an open-end non-diversified management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and the rules
and regulations promulgated thereunder; and
WHEREAS, the Portfolio Manager is registered as an investment advisor
under the Investment Advisers Act of 1940, as amended, and engages in the
business of acting as an investment advisor; and
WHEREAS, the Corporation is authorized to issue shares of Common Stock
in separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Corporation intends to initially offer shares in one
series called the BLANCHARD PRECIOUS METALS FUND, INC. (such series, being
referred to as the "Fund"); and
WHEREAS, the Corporation and the Manager have entered into an agreement
to provide for management services for the Fund on the terms and conditions set
forth therein (the "Interim Management Agreement"); and
WHEREAS, the Portfolio Manager proposes to render investment advisory
services to the Manager in connection with the Manager's responsibilities to the
Fund's portfolio on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Investment Management. Cavelti shall act as the Portfolio Manager for
the Fund and shall, in such capacity, supervise the investment and reinvestment
of the cash, securities
<PAGE>
or other properties comprising the Fund's portfolio, subject at all times to the
direction of the Manager and the policies and control of the Corporation's Board
of Directors. Cavelti shall give the Fund the benefit of its best judgment,
efforts and facilities in rendering its services as Portfolio Manager.
2. Investment Analysis and Implementation. In carrying
out its obligation under paragraph 1 hereof, the Portfolio
Manager shall:
a. use the same skill and care in providing such
service as it uses in providing services to fiduciary
accounts for which it has investment responsibilities;
b. obtain and evaluate pertinent information about significant
developments and economics, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Fund's portfolio and whether concerning the individual issuers whose
securities are included in the Fund's portfolio or the activities in
which the issuers engage, or with respect to securities which the
Portfolio Manager considers desirable for inclusion in the Fund's
portfolio;
c. determine which issuers and securities shall be
represented in the Fund's portfolio and regularly report
thereon to the Manager;
d. formulate and implement continuing programs for
the purchases and sales of the securities of such issuers
and regularly report thereon to the Manager; and
e. take, on behalf of the Fund, all actions which appear to
the Fund and the Manager necessary to carry into effect such purchase
and sale programs and supervisory functions as aforesaid, including the
placing of orders for the purchase and sale of securities for the Fund
and the prompt reporting to the Manager of such purchases and sales.
3. Broker-Dealer Relationships. The Portfolio Manager is responsible
for decisions to buy and sell securities for the Fund's portfolio, broker-dealer
selection, and negotiation of brokerage commission rates. The Portfolio
Manager's primary consideration in effecting a security transaction will be
execution at the most favorable price. In selecting a broker-dealer to execute
each particular transaction, the Portfolio Manager will take the following into
consideration: the best net price available, the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution
<PAGE>
of the broker-dealer to the investment performance of the Fund on a continuing
basis. Accordingly, the price to the Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Portfolio Manager shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused the Fund to pay a broker or dealer for effecting a portfolio
investment transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Portfolio
Manager determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Portfolio Manager's overall responsibilities with respect to the Fund and to its
other clients as to which it exercises investment discretion. The Portfolio
Manager is further authorized to allocate the orders placed by it on behalf of
the Fund to its affiliated broker-dealer or to such brokers and dealers who also
provide research or statistical material, or other services to the Fund or the
Portfolio Manager. Such allocation shall be in such amounts and proportions as
the Portfolio Manager shall determine and the Portfolio Manager will report on
said allocations regularly to Manager indicating the brokers to whom such
allocations have been made and the basis therefor.
4. Control by Board of Directors. Any investment program undertaken by
the Portfolio Manager pursuant to this Agreement, as well as any other
activities undertaken by the Portfolio Manager on behalf of the Fund pursuant
thereto, shall at all times be subject to any directives of the Board of
Directors of the Corporation. The Manager shall provide the Portfolio Manager
with written notice of all such directives, so long as this Agreement remains in
effect.
5. Compliance with Applicable Requirements. In carrying
out its obligations under this Agreement, the Portfolio Manager
shall at all times conform to:
a. all applicable provisions of the 1940 Act;
b. the provisions of the Registration Statement of
the Corporation under the Securities Act of 1933 and the
1940 Act; and
c. any other applicable provisions of state and
federal law.
<PAGE>
6. Expenses. The expenses connected with the Fund shall be borne by the
Portfolio Manager as follows:
The Portfolio Manager shall maintain, at its expense and
without cost to the Manager or the Fund, a trading function in order to carry
out its obligations under subparagraph (e) of paragraph 2 hereof to place orders
for the purchase and sale of portfolio securities for the Fund.
7. Delegation of Responsibilities. Upon request of the Manager and with
the approval of the Corporation's Board of Directors, the Portfolio Manager may
perform services on behalf of the Fund which are not required by this Agreement.
Such services will be performed on behalf of the Fund and the Portfolio
Manager's cost in rendering such services may be billed monthly to the Manager,
subject to examination by the Manager's independent accountants. Payment or
assumption by the Portfolio Manager of any Fund expense that the Portfolio
Manager is not required to pay or assume under this Agreement shall not relieve
the Manager or the Portfolio Manager of any of their obligations to the Fund or
obligate the Portfolio Manager to pay or assume any similar Fund expense on any
subsequent occasions.
8. Compensation. For the services to be rendered and the facilities
furnished hereunder, the Manager shall pay the Portfolio Manager monthly
compensation of the sum of the amounts determined by applying the following
annual rates to the Fund's aggregate daily net assets: .30% of the Fund's net
assets up to the first $150 million; .2625% of the Fund's net assets in excess
of $150 million but less than $300 million; plus .225% of the Fund's net assets
in excess of $300 million. Compensation under this Agreement shall be calculated
and accrued daily and the amounts of the daily accruals shall be paid monthly.
If this Agreement becomes effective subsequent to the first day of a month or
shall terminate before the last day of a month, compensation for that part of
the month this Agreement is in effect shall be prorated in a manner consistent
with the calculation of the fees as set forth above. Payment of the Portfolio
Manager's compensation for the preceding month shall be made as promptly as
possible after the end of each month.
9. Expense Limitation. If, for any fiscal year, the total of all
ordinary business expenses of the Fund, including all investment advisory fees
but excluding brokerage commissions and fees, payments pursuant to the Rule
12b-1 Plan then in effect, taxes, interest and extraordinary expenses such as
litigation, would exceed the most restrictive expense limits imposed by a
statute or regulatory authority of any jurisdiction in which shares of the Fund
are offered for sale, the investment advisory
<PAGE>
fee, which the Manager would otherwise receive from the Fund, shall be reduced
by the amount of such excess. The fee which the Portfolio Manager would
otherwise receive from the Manager pursuant to Paragraph 8 of this Agreement
shall also be reduced proportionately. For example, if the Manager's fee is
reduced by 1/4, the Portfolio Manager's fee from the Manager will also be
reduced by 1/4. Such reduction shall be deducted from the monthly fee otherwise
payable to the Portfolio Manager by the Manager and, if such amount should
exceed such monthly fee, the Portfolio Manager agrees to repay the Manager such
amount of its fee previously received with respect to make up the deficiency no
later than the last day of the first month of the next succeeding fiscal year.
For the purposes of this paragraph, the term "fiscal year" shall exclude the
portion of the current fiscal year which shall have elapsed prior to the date
hereof and shall include the portion of the then current fiscal year which shall
have elapsed at the date of termination of this Agreement.
10. Term. This Agreement shall become effective at the close of
business on the date hereof and shall remain in force and effect until the
earlier of the Closing Date defined in the Agreement and Plan of Reorganization
dated November 26, 1997 with respect to the Fund or for two years after its
effective date, and shall remain in effect thereafter if approved in the manner
set forth in Section 11 hereof.
11. Renewal. Following the expiration of its initial term, the
Agreement shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
a. by the Corporation's Board of Directors or by the
vote of a majority of the Fund's outstanding voting
securities (as defined in Section 2(a)(42) of the 1940 Act),
and
b. by the affirmative vote of a majority of the Directors who
are not parties to this agreement or interested persons of a party to
this Agreement (other than as a Director of the Corporation), by votes
cast in person at a meeting specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Corporation's Board of Directors or
by vote of a majority of the Fund's outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), or by the Manager or the Portfolio Manager,
on sixty (60) days' written notice to the other party. This Agreement shall
automatically terminate: (a) in the event of its assignment, the term
"assignment" having the meaning defined
<PAGE>
in Section 2(a)(4) of the 1940 Act, or (b) in the event that the Interim
Management Agreement between the Fund and the Manager shall terminate.
13. Liability of the Portfolio Manager. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Portfolio Manager
or its officers, directors or employees, or reckless disregard by the Portfolio
Manager of its duties under this Agreement, the Portfolio Manager shall not be
liable to the Manager, the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security.
14. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Manager
for this purpose shall be 707 East Main Street, Suite 1300, Richmond, Virginia
23219, that of the Corporation for this purpose shall be Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779, and the address of the Portfolio
Manager for this purpose shall be 4100 Yonge Street, Willowdale, Ontario M2P 2B6
Canada.
15. Questions of Interpretation. Any questions of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
issued pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in the provision of this Agreement is revised by rule,
regulation or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
Attest: VIRTUS CAPITAL MANAGEMENT, INC.
By
Title: Senior Vice President Title: Senior Vice President
<PAGE>
Attest: CAVELTI CAPITAL MANAGEMENT
By
Title: Title:
PAGE 3
- --------------------------------------------------------------------
A Discussion With
Your Fund Manager
[Photo: John C. Madden, Jr.]
John C. Madden, Jr. is a vice president and senior portfolio
manager of Keystone Precious Metals Holdings, Inc. and Keystone
Global Resources and Development Fund. A Chartered
Financial Analyst, Mr. Madden has more than 30 years of
experience in investment research and management, specializing
in precious metals, natural resources and energy. He holds a BA
from Yale University.
Q What factors contributed to the declining price of gold during the period?
A Gold's brief rise above $400 early in 1996 gave investors, dealers and
speculators a good opportunity to take profits, but once speculator interest
dropped off, price levels moved lower. The price stabilized in the $380 range
from June to November, when real and rumored central bank sales contributed to a
further decline. The sale of 10 million ounces by the Dutch central bank and
discussions of sales by the International Monetary Fund and the Swiss government
sent the price to its one-year low of $339.85 an ounce in early February 1997.
Once the price dipped below $340, however, investors saw a buying opportunity.
Growing physical demand in the Far East and short covering by speculators led to
a quick run up at the end of February. On February 28, 1997, the price had
rebounded to $363.45 an ounce.
Q How did these market conditions affect the stocks of gold mining companies?
A It varied, as you can see from the chart. The Financial Times Gold Mines
Index lost almost twice as much as the metal, down 18.5% for the year compared
to -9.3% for gold bullion. The XAU, another popular index of gold stock
performance, lost 15.0%. But the average gold stock mutual fund, as measured by
Lipper Analytical Services, fared a little better, losing a more modest 7.6% for
the year.
- ----------------------------------- [BAR CHART] --------------------------------
Comparative performance of Keystone
Precious Metals Holdings, Inc. and key
market indexes, March 1, 1996-February 28, 1997
KPMH* -5.16%
Lipper Gold Fund Index -7.60%
Spot Gold -9.30%
XAU -15.00%
Keystone Precious Metals Holdings declined
less than the key market measures during the year.
*Includes reinvested dividends
- --------------------------------------------------------------------------------
Fund Profile
Objective: Seeks long-term capital appreciation and protection of purchasing
power by investing in gold-oriented or other precious metal and minerals
companies.
Commencement of investment operations: June 5, 1972
Net assets: $190.1 million
Newspaper listing: PrecMtl.
- --------------------------------------------------------------------------------
PAGE 4
- --------------------------------------------------------------------
Keystone Precious Metals Holdings, Inc.
Q How did the Fund perform during the year?
A Your Fund experienced lower volatility than either the price of gold or the
leading gold indexes, as shown in the chart. During the first half of the year,
the gold-related stocks in which your Fund invests generally experienced a
delayed reaction to changes in the price of gold, remaining high in May even as
gold bullion prices were declining. But once it became clear that the price of
gold had settled lower, gold stocks moved down, too. From November onward, gold
stock performance generally paralleled the price of the metal. Your Fund reached
its low for the year in early January, about a month ahead of the price of gold.
The Fund had a strong finish to the year, buoyed by a recovery in the South
African market. In February alone, the Fund gained 14.1% while the price of gold
rose 5.5%.
Q How were supply and demand during the year?
A The supply-demand dynamic remained positive during the year, despite the
relatively low inflation environment in the U.S. and other industrialized
countries. Demand from jewelry fabricators remained strong, and continues to
exceed the annual mined production of gold. Over the past few years, this gap
was filled by several sources, notably scrap supply, central bank sales and
forward sales by producers. When central bank sales taper off, we expect supply
to tighten, which we believe should provide a favorable environment for gold
stocks over the long term.
Q You increased the Fund's North American holdings to nearly 60% of the
portfolio during the year. Please describe some of these stocks.
A Over the year we reduced our exposure in Australia and expanded our holdings
in North America. One U.S. stock that has done quite well is Getchell Gold, a
spin-off from First Mississippi Corporation that
Asset Allocation (as a percentage of portfolio assets)
February 28, 1997 February 29, 1996
North America 59.1% 50%
- ------------------------------------------------------------
South Africa 26.8% 25%
- ------------------------------------------------------------
Australia 14.1% 25%
- ------------------------------------------------------------
produces about 200,000 ounces a year from operations in northern Nevada.
Getchell has been very successful in adding to reserves, and is now developing a
mine that will more than double company output. With growing reserves and a land
position that abuts that of Santa Fe Pacific Gold, there is also the possibility
for merger or takeover activity.
In Canada, we continue to like the Canadian royalty company Euro-Nevada.
Among other assets, this company holds royalties on Getchell's current reserves
and on Barrick Gold's Goldstrike property. In addition, the company is involved
in a joint venture to develop a low-cost, 250,000 ounce per year mine in Nevada.
Expected on stream in 1998, this mine should help the company record substantial
earnings gains over the next several years.
Q What is your strategy for managing the Fund?
A The Fund's objective is to seek long-term capital appreciation and protection
of purchasing power by investing in gold-oriented or other precious metal and
minerals companies. As a sector fund, it is likely
- ----------------------------------- [PIE CHART] --------------------------------
Asset Allocation
as of February 28, 1997
U.S 29%
Canada 30%
South Africa 27%
Australia 14%
- --------------------------------------------------------------------------------
PAGE 5
- --------------------------------------------------------------------
to experience greater price fluctuation than more diversified investments, but
we rely on a conservative strategy to reduce the level of volatility. We focus
on companies with growing reserves and expanding production that may have a
greater ability to maintain their value during periods of lower gold prices. We
believe this approach offers Fund investors the advantages of ongoing exposure
to the potential of gold stocks, but with reduced downside risk.
Q Bre-X Minerals, Ltd., a Canadian-based mining company, has been in the news
since the end of the Fund's fiscal year. Is this a Fund holding?
A The Fund held a minor position--less than one percent of the portfolio--in
Bre-X at the close of the fiscal year in February. In March, questions arose
about the accuracy of company reports of gold deposits in an Indonesian mine
owned by the company. We have liquidated our position in Bre-X.
Q What is your outlook for the gold market?
A Over the past year, the bull market for stocks, the strong dollar and minimal
inflation have created an unfavorable environment for gold investments. But the
fundamentals remain positive--demand by jewelry fabricators continues to outpace
mined production. While we are not anticipating a gold rally, neither do we
expect a return to the low gold prices we saw earlier this year. We believe the
companies in your Fund's portfolio are in a good position to benefit from even
small increases in the price of gold over the coming year.
Top 10 Holdings
as of February 28, 1997
Percentage of
Stock (Country) net assets
---------------------------------------------------------
Euro Nevada Mining (Canada) 7.1
---------------------------------------------------------
Franco Nevada Mining (Canada) 5.8
---------------------------------------------------------
Getchell Gold (United States) 5.5
---------------------------------------------------------
Newmont Mining Corp. (United States) 5.1
---------------------------------------------------------
Homestake Mining (United States) 5.1
---------------------------------------------------------
Barrick Gold (Canada) 4.5
---------------------------------------------------------
Newmont Gold (United States) 4.1
---------------------------------------------------------
Randgold & Exploration (South Africa) 3.7
---------------------------------------------------------
Santa Fe Pacific Gold (United States) 3.5
---------------------------------------------------------
Pioneer Group (United States) 3.3
---------------------------------------------------------
[diamond]
This column is intended to answer
questions about your Fund. If you have a question
you would like answered, please write to:
Evergreen Keystone Investment Services, Inc.
Attn: Shareholder Communications, 22nd Floor
200 Berkeley Street, Boston, Massachusetts 02116-5034.
PAGE 6
- --------------------------------------
Keystone Precious Metals Holdings, Inc.
Your Fund's Performance
- ------------------------------- [MOUNTAIN CHART] ------------------------------
Growth of an investment in
Keystone Precious Metals Holdings, Inc.
In Thousands
Reinvested Initial
Distributions Investment
2/87 10000 10000
2/88 8954 9714
2/89 9717 10748
2/90 11063 12236
2/91 8215 9255
2/92 8879 10094
2/93 8307 9515
2/94 14495 16601
2/95 11150 12833
2/96 15222 17521
2/97 13830 16616
A $10,000 investment in Keystone Precious Metals
Holdings, Inc. made on February 28, 1987 with all
distributions reinvested was worth $16,616 on
February 28, 1997. Past performance is no guarantee
of future results.
- --------------------------------------------------------------------------------
Twelve-Month Performance as of February 28, 1997
- -----------------------------------------------------------
Total return* -5.16%
Net asset value 2/29/96 $26.35
2/28/97 $23.94
Dividends None
Capital gains $0.99
* Before deducting contingent deferred sales charge (CDSC).
Historical Record as of February 28, 1997
- -----------------------------------------------------------
If you If you did
Cumulative total return redeemed not redeem
1-year -7.89% -5.16%
5-year 64.62% 64.62%
10-year 66.16% 66.16%
Average annual total return
1-year -7.89% -5.16%
5-year 10.48% 10.48%
10-year 5.21% 5.21%
The one-year return reflects the deduction of the 3% contingent deferred sales
charge for those investors who bought and sold Fund shares after one calendar
year. Investors who retained their fund investment received the one-year return
reported in the second column of the table.
The investment return and principal value will fluctuate so that your
shares, when redeemed, may be worth more or less than the original cost.
You may exchange your shares by phone or in writing. You may also exchange
funds using Keystone's Automated Response Line (KARL). The Fund reserves the
right to change or terminate the exchange offer.
PAGE 7
- --------------------------------------
Growth of an Investment
- ----------------------------------- [PIE CHART] --------------------------------
Comparison of change in value of a $10,000 investment in
Keystone Precious Metals Holdings, Inc., the Standard and
Poor's 500 Index and the Consumer Price Index.
In Thousands February 28, 1987 through February 28, 1997
Fund Average
Annual Total Return
---------------------------
1 Year 5 Year 10 Year
-7.89% 10.48% 5.21%
Standard & Poor's Consumer Price
Fund 500 Index (S&P 500) Index (CPI)
2/87 10000 10000 10000
2/88 9714 9717 10393
2/89 10748 10845 10894
2/90 12236 12860 11467
2/91 9255 14731 12076
2/92 10094 17081 12417
2/93 9515 18900 12817
2/94 16601 20476 13140
2/95 12833 21983 13517
2/96 17521 29612 13875
2/97 16616 37357 14252
*Reflects the deduction of the Fund's contingent deferred sales charge of 3%.
Past performance is no guarantee of future results. The Consumer Price Index is
through January 31, 1997.
- --------------------------------------------------------------------------------
This chart graphically compares your Fund's total return performance to certain
investment indexes. It is the result of fund performance guidelines issued by
the Securities and Exchange Commission. The intent is to provide investors with
more information about their investment.
Components of the chart
The chart is composed of three lines that represent the accumulated value of an
initial $10,000 investment for the period indicated. The lines illustrate a
hypothetical investment in:
1. Keystone Precious Metals Holdings, Inc.
Your Fund seeks capital appreciation primarily from investments in gold-oriented
or other precious metal and minerals companies. The return is quoted after
deducting sales charges (if applicable), fund expenses, and transaction costs
and assumes reinvestment of all distributions.
2. Standard & Poor's 500 Index (S&P 500)
The S&P 500 is a broad-based unmanaged index of common stock prices. It is
comprised of stocks of the largest U.S. companies. These stocks are selected and
compiled by Standard & Poor's Corporation according to criteria that may be
unrelated to your Fund's investment objective.
3. Consumer Price Index (CPI)
This index is a widely recognized measure of the cost of goods and services
produced in the U.S. The index contains factors such as prices of services,
housing, food, transportation and electricity which are compiled by the U.S.
Bureau of Labor Statistics. The CPI is generally considered a valuable benchmark
for investors who seek to outperform increases in the cost of living.
These indexes do not include transaction costs associated with buying and
selling securities, and do not hold cash to meet redemptions. It would be
difficult for most individual investors to duplicate these indexes.
Understanding what the chart means
The chart demonstrates your Fund's total return performance in relation to a
well known investment index and to
PAGE 8
- --------------------------------------
Keystone Precious Metals Holdings, Inc.
increases in the cost of living. It is important to understand what the chart
shows and does not show.
This illustration is useful because it charts Fund and index performance
over the same time frame and over a long period. Long-term performance is a more
reliable and useful measure of performance than measurements of short-term
returns or temporary swings in the market. Your financial adviser can help you
evaluate fund performance in conjunction with the other important financial
considerations such as safety, stability and consistency.
Limitations of the chart
The chart, however, limits the evaluation of Fund performance in several ways.
Because the measurement is based on total returns over an extended period of
time, the comparison often favors those funds which emphasize capital
appreciation when the market is rising. Likewise, when the market is declining,
the comparison usually favors those funds which take less risk.
Performance can be distorted
Funds which are more conservative in their orientation and which place an
emphasis on capital preservation will tend to compare less favorably when the
market is rising. In addition, funds which have income as one of their
objectives also will tend to compare less favorably to relevant indexes.
Indexes may also reflect the performance of some securities which a fund
may be prohibited from buying. A bond fund, for example, may be limited to
investments in only high quality bonds, or a stock fund may only be able to buy
stocks that have been traded on a stock exchange for a minimum number of years
or of a certain company size. Indexes usually do not have the same investment
restrictions as your Fund.
Indexes do not include costs of investing
The comparison is further limited in its utility because the index does not take
into account any deductions for sales charges, transaction costs or other fund
expenses. Your Fund's performance figures do reflect such deductions. Sales
charges--whether up-front or deferred--pay for the cost of the investment advice
of your financial adviser. Transaction costs pay for the costs of buying and
selling securities for your Fund's portfolio. Fund expenses pay for the costs of
investment management and various shareholder services. None of these costs are
reflected in index total returns. The comparison is not completely realistic
because an index cannot be duplicated by an investor--even an unmanaged
index--without incurring some charges and expenses.
One of several measures
The chart is one of several tools you can use to understand your investment. It
should be read in conjunction with the Fund's prospectus, and annual and
semiannual reports. Also, your financial adviser, who understands your personal
financial situation, can best explain the features of your Keystone fund and how
it applies to your financial needs.
Future returns may be different
Shareholders also should be mindful that the long-run performance of either the
Fund or the indexes is not representative of what shareholders should expect to
receive from their Fund investment in the future; it is presented to illustrate
only past performance and is not a guarantee of future returns.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
BLANCHARD PRECIOUS METALS FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(800) 829-3863
By and In Exchange For Shares of
EVERGREEN PRECIOUS METALS FUND
a Series of
EVERGREEN INTERNATIONAL TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets and liabilities of Blanchard Precious Metals
Fund, Inc. ("Precious Metals"), to Evergreen Precious Metals Fund ("Evergreen
Precious Metals") (formerly known as "Keystone Precious Metals Holdings, Inc."),
a series of Evergreen International Trust, in exchange for Class A shares of
beneficial interest, $.001 par value per share, of Evergreen Precious Metals,
consists of this cover page and the following described documents, each of which
is attached hereto and incorporated by reference herein:
(1) The Statement of Additional Information of Evergreen Precious
Metals dated April 30, 1997; (To be filed by amendment)
(2) The Statement of Additional Information of Precious Metals
dated August 31, 1997; (To be filed by amendment)
(3) Annual Report of Precious Metals for the year ended September
30, 1997; (To be filed by amendment)
(4) Annual Report of Evergreen Precious Metals for the year ended
October 31, 1997; (To be filed by amendment) and
(5) Pro Forma Combining Financial Statements (unaudited) dated
September 30, 1997.
This Statement of Additional Information, which is not a
prospectus, supplements, and should be read in conjunction with,
<PAGE>
the Prospectus/Proxy Statement of Evergreen Precious Metals and Precious Metals
dated January 5, 1998. A copy of the Prospectus/Proxy Statement may be obtained
without charge by calling or writing to Evergreen Precious Metals or Precious
Metals at the telephone numbers or addresses set forth above.
The date of this Statement of Additional Information is January 5,
1998.
<PAGE>
Keystone Precious Metals Holdings, Inc.
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
PORTFOLIO OF INVESTMENTS (000's omitted)
August 31, 1997
<TABLE>
<CAPTION>
Keystone Precious Blanchard Precious
Metals Holdings, Inc. Metals Fund, Inc. Proforma Combined
----------------------- ----------------------- -------------------
Market Market Market
Shares Value Shares Value Adjustments Shares Value
----------------------- ----------------------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCKS (94.0%)
AUSTRALIA (9.0%)
Gold Mining (4.8%)
Croesus Mining NL 600 156 600 156
Delta Gold NL 800 986 800 986
First Silver Reserve Inc. 230 181 230 181
Perilya Mines NL (a) 3,500 1,515 3,500 1,515
Plutonic Resources NL 1,052 2,995 1,052 2,995
Ross Mining NL 1,376 788 1,376 788
Sons of Gwalia Ltd. 800 2,523 800 2,523
- ------------------------------------------------------------------------------------------------------------------------------------
8,807 337 0 9,144
Metals and Mining (4.2%)
Acacia Resources (a) 2,899 3,191 2,899 3,191
Laverton Gold NL 1,000 165 1,000 165
Lone Star Exploration 750 143 750 143
Lone Star Exploration 1,258 299 1,258 299
Lone Star Exploration NL 550 131 550 131
Normandy Mining Ltd. 3,382 4,094 3,382 4,094
- ------------------------------------------------------------------------------------------------------------------------------------
7,285 738 0 8,023
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL AUSTRALIA 16,092 1,075 0 17,167
- ------------------------------------------------------------------------------------------------------------------------------------
CANADA (38.7%)
Gold Mining (33.4%)
Cambior Inc. 421 4,503 421 4,503
Eldorado Gold Corp New. 1,406 3,959 1,406 3,959
Euro-Nevada Mining Ltd. 750 11,480 750 11,480
Franco-Nevada Mining Corp. Ltd. 470 11,155 95 2,260 565 13,415
Freeport McMoran Copper, ADR 25 464 25 464
Geomaque Expls Ltd. Com 555 1,235 555 1,235
Geomaque Expls Ltd. Restricted Shs 161 359 161 359
Getchell Gold Corp. (a) 180 6,110 180 6,110
Greenstone Resources Ltd. 296 2,719 296 2,719
Kinross Gold Corp. (a) 150 647 510 2,199 660 2,846
New Mex Mining Ltd 961 675 961 675
Orvana Minerals Corp. (a) 337 1,214 337 1,214
Philex Gold Inc. 174 689 174 689
Prime Resources Group Inc. (a) 525 4,234 525 4,234
Santa Cruz Gold Inc. 2,000 605 2,000 605
TVX Gold Inc. (a) 185 961 1,260 6,626 1,445 7,587
Vengold Inc. (a) 429 155 429 155
Viceroy Resource Corp. 450 1,070 450 1,070
- ------------------------------------------------------------------------------------------------------------------------------------
35,956 27,363 0 63,319
Metals and Mining (5.3%)
Aber Resources Ltd. (a) 100 1,312 100 1,312
Agnico Eagle Mines Ltd. 26 228 26 228
Ariel Resources Ltd. 1,640 390 1,640 390
Barrick Gold 105 2,368 105 2,368
Bema Gold Corp. (a) 400 2,103 400 2,103
East Rand Gold & Uranium Co. Ltd., ADR 517 694 517 694
Golden Knight Res Inc. 402 911 402 911
International Precious Metals Corp (a) 50 353 50 353
Repadre Capital Corp. (a) 300 1,621 300 1,621
- ------------------------------------------------------------------------------------------------------------------------------------
7,985 1,995 0 9,980
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CANADA 43,941 29,358 0 73,299
- ------------------------------------------------------------------------------------------------------------------------------------
0 0
SOUTH AFRICA (18.1%) 0 0
Gold Mining (6.8%) 0 0
Free State Consolidated Gold Mines Ltd. 75 380 75 380
Free State Consolidated Gold Mines Ltd. ADR 283 1,433 200 1,025 483 2,458
Vaal Reefs Exploration & Mining Ltd. 19 923 19 923
Vaal Reefs Exploration & Mining Ltd. ADR 638 3,210 255 1,275 893 4,485
Western Areas Gold Mining Ltd. ADR (a) 289 2,414 289 2,414
Western Deep Levels Ltd. 21 501 21 501
Western Deep Levels Ltd. ADR 75 1,809 75 1,809
- ------------------------------------------------------------------------------------------------------------------------------------
10,670 2,300 0 12,970
Metals and Mining (11.3%)
Ashanti Goldfields Ltd. (GDR) (a)(b) 290 3,004 255 2,646 545 5,650
Avgold Ltd. ADR (a) 2,933 2,676 2,933 2,676
Avmin Ltd. ADR 150 1,838 150 1,838
DeBeers Centenary 110 3,505 110 3,505
DeBeers Consolidated Mines Ltd. ADR 45 1,446 45 1,446
Elandsrand Gold Mining Ltd. ADR 300 1,023 300 1,023
Harmony Gold Mining Ltd., ADR (a) 267 1,295 267 1,295
Harmony Gold Mining Ltd. (a) 150 727 150 727
Randgold & Exploration Co. Ltd. (a) 300 1,055 300 1,055
Randgold Resources Inc. (b) 70 962 70 962
</TABLE>
<PAGE>
Keystone Precious Metals Holdings, Inc.
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
PORTFOLIO OF INVESTMENTS (000's omitted)
August 31, 1997
<TABLE>
<CAPTION>
Keystone Precious Blanchard Precious
Metals Holdings, Inc. Metals Fund, Inc.
------------------------------ ---------------------------------
Market Market
Shares Value Shares Value
-------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Rustenberg Platinum Holdings 73 1,238
- ------------------------------------------------------------------------------------------------------------------------
18,769 2,646
- ------------------------------------------------------------------------------------------------------------------------
TOTAL SOUTH AFRICA 29,439 4,946
- ------------------------------------------------------------------------------------------------------------------------
UNITED STATES (28.2%)
Gold Mining (18.5%)
Dayton Mining Corp 10 31
Homestake Mining Co. 448 6,272 260 3,640
Meridian Gold Inc. 433 1,919
Newmont Gold Co. 135 5,839
Newmont Mining Corp. 348 14,710 65 2,729
- ------------------------------------------------------------------------------------------------------------------------
26,821 8,319
Metals and Mining (9.7%)
Canyon Resource Corp. (a) 499 1,123 1,425 3,206
Pioneer Group Inc. 220 7,136
Placer Dome Inc. 135 2,244
Stillwater Mining Company (a) 221 4,639
- ------------------------------------------------------------------------------------------------------------------------
12,898 5,450
- ------------------------------------------------------------------------------------------------------------------------
TOTAL UNITED STATES 39,719 13,769
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 129,191 49,148
- ------------------------------------------------------------------------------------------------------------------------
Principal Principal
--------- ---------
CORPORATE BONDS (0.8%)
Greenstone Resources Ltd., Series NT, 9%, 2/28/02 0 0 2,250 1,556
- ------------------------------------------------------------------------------------------------------------------------
WARRANTS (0.5%) (a) Shares
------
Atlas Corp Warrants, expire 12/15/99 228 2
Canyon Resource Corp. Warrants, expire 1999 75 0
Geomaque Expls Ltd. Spl Warrants, expire 12/15/99 325 723
Greenstone Resources Ltd.Warrants, expire 2/28/02 45 139
- ------------------------------------------------------------------------------------------------------------------------
0 864
- ------------------------------------------------------------------------------------------------------------------------
Total Warrants 0 864
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS (Cost -
$136,134, $78,318, and $214,452, respectively) 129,191 51,568
- ------------------------------------------------------------------------------------------------------------------------
Principal Amount Principal Amount
---------------- ----------------
Repurchase Agreements (4.3%)
First Boston Inc. purchased 8/29/97, 5.53%,
maturing value 9/2/97 (c) (cost 7,678) 7,768 7,768
Keystone Joint Repurchase Agreement, Investments
in repurchase agreements, in a joint trading account
purchased 8/29/97, 5.585%, maturing 9/2/97,
maturing value $327 (c) (cost, $327) 327 327
- ------------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements 327 7,768
INVESTMENTS IN WHOLLY-OWNED
UNCONSOLIDATED FOREIGN SUBSIDIARY (0.4%)
Precious Metals (Bermuda) Ltd. 823
- ------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- NET (0.0%) 200 -171
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100.0%) $130,541 $59,165
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Proforma Combined
-------------------------------
Market
Adjustments Shares Value
--------------- -----------------------------------
<S> <C> <C> <C>
Rustenberg Platinum Holdings 73 1,238
- ----------------------------------------------------------------------------------------------------------
0 21,415
- ----------------------------------------------------------------------------------------------------------
TOTAL SOUTH AFRICA 0 34,385
- ----------------------------------------------------------------------------------------------------------
UNITED STATES (28.2%)
Gold Mining (18.5%)
Dayton Mining Corp 10 31
Homestake Mining Co. 708 9,912
Meridian Gold Inc. 433 1,919
Newmont Gold Co. 135 5,839
Newmont Mining Corp. 413 17,439
- ----------------------------------------------------------------------------------------------------------
0 35,140
Metals and Mining (9.7%)
Canyon Resource Corp. (a) 1,924 4,329
Pioneer Group Inc. 220 7,136
Placer Dome Inc. 135 2,244
Stillwater Mining Company (a) 221 4,639
- ----------------------------------------------------------------------------------------------------------
0 18,348
- ----------------------------------------------------------------------------------------------------------
TOTAL UNITED STATES 0 53,488
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 0 178,339
- ----------------------------------------------------------------------------------------------------------
Principal
---------
CORPORATE BONDS (0.8%)
Greenstone Resources Ltd., Series NT, 9%, 2/28/02 2,250 1,556
- ----------------------------------------------------------------------------------------------------------
WARRANTS (0.5%) (a) Shares
------
Atlas Corp Warrants, expire 12/15/99 228 2
Canyon Resource Corp. Warrants, expire 1999 75 0
Geomaque Expls Ltd. Spl Warrants, expire 12/15/99 325 723
Greenstone Resources Ltd.Warrants, expire 2/28/02 45 139
- ----------------------------------------------------------------------------------------------------------
0 864
- ----------------------------------------------------------------------------------------------------------
Total Warrants 0 864
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS (Cost -
$136,134, $78,318, and $214,452, respectively) 0 180,759
- ----------------------------------------------------------------------------------------------------------
Principal Amount
----------------
Repurchase Agreements (4.3%)
First Boston Inc. purchased 8/29/97, 5.53%,
maturing value 9/2/97 (c) (cost 7,678) 7,768 7,768
Keystone Joint Repurchase Agreement, Investments
in repurchase agreements, in a joint trading account
purchased 8/29/97, 5.585%, maturing 9/2/97,
maturing value $327 (c) (cost, $327) 327 327
- ----------------------------------------------------------------------------------------------------------
Total Repurchase Agreements 8,095
INVESTMENTS IN WHOLLY-OWNED
UNCONSOLIDATED FOREIGN SUBSIDIARY (0.4%)
Precious Metals (Bermuda) Ltd. 0 823
- ----------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- NET (0.0%) 0 29
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
NET ASSETS (100.0%) $189,706
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Non-incoming producing security.
(b) Securities that may be resold to "qualified institutional buyers" under
Rule 144A of the Securities Act of 1933. These securities have been
determined to be liquid under guidelines established by the Board of
Directors.
(c) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at August 29, 1997.
Legend of Portfolio Abbreviations:
ADR - American Depository Receipt
GDR - Global Depository Receipt
<PAGE>
Keystone Precious Metals Holdings, Inc.
Pro Forma Combining Financial Statements (unaudited)
Statement of Assets and Liabilities (000's)
August 31, 1997
<TABLE>
<CAPTION>
Keystone Blanchard
Precious Metals Precious Metals Pro Forma
Holdings, Inc. Fund, Inc. Adjustments Combined
------------------------------------------------------- ----------------
<S> <C> <C> <C> <C>
Assets:
Investments at value (cost $136,461, $86,086 and
$222,547, respectively) $129,518 $59,336 $188,854
Investment in wholly-owned unconsolidated
foreign subsidiary, at fair value 823 0 823
---------------------------------------------------------------------------
Total investments 130,341 59,336 189,677
---------------------------------------------------------------------------
Cash 0 117 117
Dividends & interest receivable 458 279 737
Receivable for investment sold 0 0 0
Receivable for Fund shares sold 236 77 313
Prepaid expenses 37 0 37
Other assets 2 0 2
Due from Investment Advisor 0 0 0
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets 131,074 59,809 0 190,883
Liabilities:
Payable for investments purchased 0 424 424
Distribution plan expenses 130 74 204
Payable for Fund shares redeemed 253 0 253
Due to related parties 3 51 54
Accrued expenses and other liabilities 147 95 242
- ---------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 533 644 0 1,177
Net Assets $130,541 $59,165 $0 $189,706
=================================================================================================================================
Net assets are comprised of:
Paid-in capital $127,786 $92,112 $219,898
Undistributed net investment income (accumulated
distributions in excess of investment income) 4,104 (14,025) (9,921)
Accumulated net realized gain (loss) on investments
and foreign currency related transactions 5,596 7,829 13,425
Net unrealized depreciation on investments
and foreign currency related transactions (6,945) (26,751) (33,696)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets $130,541 $59,165 $189,706
=================================================================================================================================
Net Assets $130,541 $59,165 $189,706
Shares of Beneficial Interest Outstanding 7,098 11,981 (8,763) 10,316
Net Asset Value $18.39 $4.94 $18.39
</TABLE>
See Notes to Pro Forma Combining Financial Statements.
<PAGE>
Keystone Precious Metals Holdings, Inc.
Pro Forma Combining Financial Statements (unaudited)
Statement of Operations (000's)
August 31, 1997
<TABLE>
<CAPTION>
Keystone Blanchard
Precious Metals Precious Metals Pro Forma
Holdings, Inc. Fund, Inc. Adjustments Combined
---------------------------------------------------- --------------
<S> <C> <C> <C> <C>
Investment Income:
Dividend income (net of withholding taxes of $136,
36 and $172, respectively) $2,094 $697 $2,791
Interest income 179 636 815
-----------------------------------------------------------------------
Total investment income 2,273 1,333 0 3,606
-----------------------------------------------------------------------
Expenses:
Management fee 1,141 775 (341) (a) 1,575
Distribution Plan expenses 1622 582 (388) (b) 1,816
Transfer agent fee 703 106 110 (c) 919
Custodian fee 150 110 (38) (d) 222
Printing 52 40 (24) (e) 68
Registration fees 124 27 (27) (f) 124
Professional fees 74 26 (24) (g) 76
State tax expense 49 2 21 (h) 72
Directors' fees and expenses 17 2 6 (i) 25
Administrative service fees 12 79 (73) (j) 18
Miscellaneous 17 6 2 (k) 25
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 3,961 1,755 (776) 5,525
Less: Fee waivers and/or reimbursements (20) (7) 0 (27)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 3,941 1,748 (776) 5,498
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (1,668) (415) 776 (1,307)
Equity in earnings of wholly-owned unconsolidated
foreign subsidiary 82 0 82
Net realized and unrealized gain (loss) on investments and
foreign currency related transactions
Net realized gain (loss) on investments and foreign
currency related transactions 7,828 (2,009) 5,819
Net change in unrealized appreciation
(depreciation) on investments (49,113) (23,036) (72,149)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (41,285) (25,045) 0 (66,330)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations ($42,871) ($25,460) $776 ($67,555)
====================================================================================================================================
</TABLE>
(a) Contractual agreement.
(b) 1% on Class B shares, 0.25% on Class A shares.
(c) Per account charge.
(d) Asset-based fee.
(e) Per account charge.
(f) Duplicate fee on funds.
(g) Duplicate audit fee.
(h) Asset-based fee.
(I) Asset-based fee.
(j) Asset-based fee.
(k) Asset-based fee.
See Notes to Pro Forma Combining Financial Statements.
<PAGE>
Keystone Precious Metals Holdings, Inc.
Notes to Pro Forma Combining Financial Statements (Unaudited)
August 31, 1997
1. Basis of Combination - The Pro Forma Statement of Assets and Liabilities,
including the Pro Forma Portfolio of Investments, and the related Pro Forma
Statement of Operations ("Pro Forma Statements") reflect the accounts of
Keystone Precious Metals Holdings, Inc. ("Keystone") and Blanchard Precious
Metals Fund, Inc. ("Blanchard") at August 31, 1997 and for the year then ended.
The Pro Forma Statements give effect to the proposed transfer of all assets and
liabilities of Blanchard shares in exchange for shares of Keystone. The Pro
Forma Statements reflect the expense of each Fund in carrying out its
obligations under the Agreement and Plan of Reorganization (the
"Reorganization") as though the merger occurred at the beginning of the period
presented.
Under the Reorganization, Keystone will acquire substantially all of the assets
and assume certain identified liabilities of Blanchard. Thereafter, there will
be a distribution of such shares of Keystone to shareholders of Blanchard in
liquidation and subsequent termination thereof. The information contained herein
is based on the experience of each Fund for the period ended August 31, 1997 and
is designed to permit shareholders of the consolidating mutual funds to evaluate
the financial effect of the proposed Reorganization. The expenses of Blanchard
and Keystone in connection with the Reorganization (including the cost of any
proxy soliciting agents), will be borne by First Union National Bank of North
Carolina.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Fund incorporated by reference in the Statements of
Additional Information.
2. Shares of Beneficial Interest - The Pro Forma net asset values per share
assume the issuance of additional shares of Keystone, which would have been
issued at August 31, 1997 in connection with the proposed Reorganization. The
amount of additional shares assumed to be issued was calculated based on the net
assets of Blanchard as of August 31, 1997 of $59,165 (reported in 000's),
respectively, and the net asset value per share of Keystone of $18.39.
Additional shares issued were converted and distributed to the aforementioned
Fund according to its relative share value conversion ratio.
The Pro Forma shares outstanding of 10,316 (reported in 000's) consist of 3,218
(reported on 000's) additional shares of Keystone to be issued in the proposed
reorganization, as calculated above, in addition to the shares of Keystone
outstanding as of August 31, 1997.
3. Pro Forma Operations - The Pro Forma Statement of Operations assumes similar
rates of gross investment income for the investments of each Fund. Accordingly,
the combined gross investment income is equal to the sum of each Fund's gross
investment income. Pro Forma operating expenses include the actual expenses of
each Fund and the combined Fund, with certain expenses adjusted to reflect the
expected expenses of the combined entity. The investment advisory and
distribution fees have been charged to the combined Fund based on the fee
schedule in effect for Keystone at the combined level of average net assets for
the period ended August 31, 1997.
<PAGE>
KEYSTONE PRECIOUS METALS HOLDINGS, INC.
PART C
OTHER INFORMATION
Item 15. Indemnification.
The response to this item is incorporated by reference to "Liability
and Indemnification of Trustees and Directors" under the caption "Comparative
Information on Shareholders' Rights" in Part A of this Registration Statement.
Item 16. Exhibits:
1. Declaration of Trust of Evergreen International Trust.
To be filed by amendment.
2. Bylaws of Evergreen International Trust. To be filed by amendment.
3. Not applicable.
4. Agreement and Plan of Reorganization. Exhibit A to Prospectus contained in
Part A of this Registration Statement.
5. Declaration of Trust Articles II., III.(6)(c), IV.(3), IV.(8), V., VI., VII.,
and VIII. and By-Laws Articles II., III.
and VIII.
6(a). Form of Investment Advisory Agreement between Keystone Investment
Management Company and Evergreen International Trust.
To be filed by amendment.
6(b). Form of Interim Management Contract. Exhibit B to
Prospectus contained in Part A of this Registration Statement.
6(c). Form of Interim Sub-Advisory Agreement. Exhibit C to
Prospectus contained in Part A of this Registration Statement.
7(a). Distribution Agreement between Evergreen Distributor, Inc. Evergreen
International Trust. To be filed by amendment.
7(b). Form of Dealer Agreement for Class A, Class B and Class C shares used by
Evergreen Distributor, Inc. To be filed by amendment.
8. Deferred Compensation Plan. To be filed by amendment.
<PAGE>
9. Custody Agreement between State Street Bank and Trust
Company and Evergreen International Trust. To be filed by
amendment.
10(a). Rule 12b-1 Distribution Plan. To be filed by amendment.
10(b). Multiple Class Plan. To be filed by amendment.
11. Opinion and consent of Sullivan & Worcester LLP. To be filed by amendment.
12. Tax opinion and consent of Sullivan & Worcester LLP. To be filed by
amendment.
13. Not applicable.
14(a). Consent of KPMG Peat Marwick LLP. Filed herewith.
14(b). Consent of Deloitte & Touche LLP. To be filed by amendment.
15. Not applicable.
16. Powers of Attorney. Filed herewith.
17(a). Form of Proxy Card. Filed herewith.
17(b). Registrant's Rule 24f-2 Declaration. Incorporated by
reference to Registrant's Form N-1A Registration Statement -
Registration Statement No. 33-11050.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus that is
a part of this Registration Statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration
<PAGE>
Statement for the securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective
amendment, an opinion of counsel or copy of an Internal Revenue Service ruling
supporting the tax consequences of the proposed Reorganization within a
reasonable time after receipt of such opinion or ruling.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of New York and State
of New York, on the 2nd day of December, 1997.
KEYSTONE PRECIOUS METALS
HOLDINGS, INC.
By: /s/ John J. Pileggi
----------------------
Name: John J. Pileggi
Title: President
As required by the Securities Act of 1933, the following persons have
signed this Registration Statement in the capacities indicated on the 2nd day of
December, 1997.
Signatures Title
- ---------- -----
/s/John J. Pileggi President and
- --------------------- Treasurer
John J. Pileggi
/s/Laurence B. Ashkin* Director
- ---------------------
Laurence B. Ashkin
/s/Charles A. Austin* Director
- ---------------------
Charles A. Austin
/s/K. Dun Gifford* Director
- ---------------------
K. Dun Gifford
/s/James S. Howell* Director
- ---------------------
James S. Howell
/s/Leroy Keith, Jr.* Director
- ---------------------
Leroy Keith, Jr.
/s/Gerald M. McDonnell* Director
<PAGE>
- ---------------------
Gerald M. McDonnell
/s/Thomas L. McVerry* Director
- ---------------------
Thomas L. McVerry
/s/William Walt Pettit* Director
- ---------------------
William Walt Pettit
/s/David M. Richardson* Director
- ---------------------
David M. Richardson
/s/Russell A. Salton III* Director
- ---------------------
Russell A. Salton III
/s/Michael S. Scofield* Director
- ---------------------
Michael S. Scofield
/s/Richard J. Shima* Director
- ---------------------
Richard J. Shima
* By: /s/Martin J. Wolin
------------------
Martin J. Wolin
Attorney-in-Fact
Martin J. Wolin, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons and included as Exhibit 16 to this
Registration Statement.
<PAGE>
INDEX TO EXHIBITS
N-14
EXHIBIT NO.
14 Consent of KPMG Peat Marwick LLP
16 Powers of Attorney
17 (a) Form of Proxy
- ---------------------
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Directors and Shareholders
Keystone Precious Metals Holdings, Inc.
We consent to the use of our report dated March 31, 1997 for Keystone Precious
Metals Holdings, Inc. incorporated by reference herein and to the reference to
our firm under the caption "FINANCIAL STATEMENTS AND EXPERTS" in the
prospectus/proxy
statement.
\s\KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
Boston Massachusetts
December 3, 1997
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Laurence B. Ashkin Director/Trustee
- ---------------------
Laurence B. Ashkin
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Charles A. Austin, III Director/Trustee
- -------------------------
Charles A. Austin, III
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/K. Dun Gifford Director/Trustee
- -----------------
K. Dun Gifford
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/James S. Howell Director/Trustee
- ------------------
James S. Howell
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Leroy Keith, Jr. Director/Trustee
- -------------------
Leroy Keith, Jr.
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Gerald M. McDonnell Director/Trustee
- ----------------------
Gerald M. McDonnell
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Thomas L. McVerry Director/Trustee
- --------------------
Thomas L. McVerry
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/William Walt Pettit Director/Trustee
- ----------------------
William Walt Pettit
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/David M. Richardson Director/Trustee
- ----------------------
David M. Richardson
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Russell A. Salton, III MD Director/Trustee
- ----------------------------
Russell A. Salton, III MD
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Michael S. Scofield Director/Trustee
- ----------------------
Michael S. Scofield
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June
18, 1997.
Signature Title
- --------- -----
/s/Richard J. Shima Director/Trustee
- -------------------
Richard J. Shima
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE TODAY!
Please detach at perforation before mailing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
BLANCHARD PRECIOUS METALS FUND, INC.
PROXY FOR THE MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 20, 1998
The undersigned, revoking all Proxies heretofore given, hereby appoints
, and or any of them as Proxies of the undersigned, with full power of
substitution, to vote on behalf of the undersigned all shares of Blanchard
Precious Metals Fund, Inc. ("Precious Metals") that the undersigned is entitled
to vote at the special meeting of shareholders of Growth & Income to be held at
2:00 p.m. on Friday, February 20, 1998 at the offices of the Evergreen Funds,
200 Berkeley Street, Boston, Massachusetts 02116, and at any adjournments
thereof, as fully as the undersigned would be entitled to vote if personally
present.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON
THIS PROXY. If joint owners, EITHER may sign this
Proxy. When signing as attorney, executor,
administrator, trustee, guardian, or custodian for a
minor, please give your full title. When signing on
behalf of a corporation or as a partner for a
partnership, please give the full corporate or
partnership name and your title, if any.
Date , 199
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Signature(s) and Title(s), if applicable
<PAGE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PRECIOUS
METALS. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION
TO BE TAKEN ON THE FOLLOWING PROPOSALS. THE SHARES REPRESENTED HEREBY WILL BE
VOTED AS INDICATED OR FOR THE PROPOSALS IF NO CHOICE IS INDICATED. THE BOARD OF
DIRECTORS OF PRECIOUS METALS RECOMMENDS A VOTE FOR THE PROPOSALS. PLEASE MARK
YOUR VOTE BELOW IN BLUE OR BLACK INK. DO NOT USE RED INK. EXAMPLE: X
1. To approve an Agreement and Plan of Reorganization whereby Evergreen
Precious Metals Fund, a series of Evergreen International Trust, will (i)
acquire all of the assets of Precious Metals in exchange for shares of Evergreen
Precious Metals Fund; and (ii) assume certain identified liabilities of Precious
Metals, as substantially described in the accompanying Prospectus/Proxy
Statement.
- ---- FOR ---- AGAINST ---- ABSTAIN
2. To approve the proposed Interim Management Contract with Virtus
Capital Management, Inc.
- ---- FOR ---- AGAINST ---- ABSTAIN
3. To approve the proposed Interim Sub-Advisory
Agreement between Virtus Capital Management, Inc. and Cavelti
Capital Management, Ltd.
- ---- FOR ---- AGAINST ---- ABSTAIN
4. To consider and vote upon such other matters as may properly come
before said meeting or any adjournments thereof.
<PAGE>
